Pressure Rises on BOJ

Tim Duy: And the Pressure on the Bank of Japan Rises, by Tim Duy: The Wall Street Journal reports that Japanese Prime Minister Shinzo Abe is serious about a 2 percent inflation target:

Bank of Japan to Adopt 2% Inflation Target Bloomberg reports Yen Falls to Lowest Since 2010 on Stimulus The yen reached the weakest since June 2010 versus the dollar after Japanese Prime Minister Shinzo Abe’s government said it will spend 10.3 trillion yen ($116 billion) in new stimulus efforts that tend to weaken a currency.

Financial Times reported that Bank of Japan has started an open monetary easing in attempt to put an end to the years lasting corrosive deflation. On Tuesday the bank announced its goals to achieve a rate of 2% inflation, twice as much as its current rate of 1%. The campaign will be much like the US Federal Reserve’s policy of “limitless stimulus”.   

By Tom Lydon: By John Spence & Tom Lydon CurrencyShares Japanese Yen Trust (FXY) nosedived more than 2% on Thursday after the Bank of Japan unveiled a bold new plan to fight deflation including new easing measures that stunned the market.The central bank said it plans to double its holdings of government bonds and ETFs the next two years.

Kudos to Kyle Bass at Hayman Advisers for warning that the Bank of Japan would lose control of its 70 trillion bond buying blitz. The spike in the 10-year yield to 1pc on Thursday was certainly shocking to behold.

Kyle Bass has been betting that Japan, which has the highest government debt-to-GDP ratio in the world, will eventually lose control of the bond market once investors wake up to this concept.

Currency wars again took another leap forward this week as Japan’s Economic Minister Wants Nikkei to Surge 17% to 13,000 by March. Economic and fiscal policy minister Akira Amari said Saturday the government will step up economic recovery efforts so that the benchmark Nikkei index jumps an additional 17 percent to 13,000 points by the end of March.