Is The BOJ Preparing An Imminent Announcement Of Its Own Latest (And Certainly Not Greatest) QE?

Tyler Durden's picture

A quick glance at the USDJPY chart shows that something is afoot in the land of the rising sun. Following an earlier report from Bloomberg, that the BOJ may lose its independence (kinda like our own Fed) after 20 years of feeble QE have proven to be unsuccessful, BOJ governor Shirakawa must know the end (for quasi-prudent monetary policy) is in sight: "Your Party, an opposition group, plans to submit a bill in the Diet session running through December that would give the government a greater role in BOJ policymaking. Ichiro Ozawa, a former challenger to Prime Minister Naoto Kan whose calls for currency intervention and enlarged fiscal stimulus have been adopted by Kan, made a similar proposal last month." Which means that the BOJ's balance sheet, which has been relatively flat when compared to peer central banks, especially since FX interventions will likely be sterilized, is about to explode and the JPY will plunge once the carry traders reorient themselves to shorting the original carry currency of choice. Indeed, Reuters cites a Nikkei report that now that the BOJ two-day meeting is winding down, may announce yet another case of asset-backed security purchases. If that happens look for the recent dollar strength to persist, as Yen poundage becomes the mangaporn choice du jour.

As a reminder, here is how Japan has demonstrated remarkable restraint (at least recently) as everyone else has been printing.

Of course, on the other hand, "everyone else" has about 20 years of catching up to do.

But, as Reuters, confirms, this does not mean Japan will just sit there and take it:

The Bank of Japan might announce additional monetary easing measures going beyond initial expectations after its policy board winds up a two-day meeting on Tuesday, the Nikkei business daily said.

The BOJ believes that downside risks to the economy have grown as the yen continues to move upward, the global economy slows, and the effects of domestic stimulus measures fade, the daily said.

Initially, the bank was seen expanding low-interest loans to financial institutions for durations of 3-6 months, however, more board members argue that the bank should go further to show it is serious about curbing the yen's appreciation and ending deflation, the Nikkei said.

The board is expected to discuss diversifying how it provides funds to the financial market. It may decide to buy asset-backed securities and lend to small and midsize businesses, the paper said.

The BOJ hopes to boost the flow of funds to the private sector through such moves to address the slump in demand, a cause of deflation, it said.

The BOJ may also move to increase buying of long-term Japanese Government Bonds, the business daily said.

One reason that the bank is considering stronger measures is that the yen continues to remain strong, the Nikkei said.

In other words, the BOJ will continue to use FX intervention as an acute weapon every time the USDJPY drops below 83, and gradually implement asset-backed purchases as the chronic intervention against endless deflation.

Because this time it will be different. And, because, as the G-7 people promised, and everyone believed them, there will be no competitive devalution. Ever.

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themosmitsos's picture

Tyler, very interesting ...

my only problem is that I do not believe that either the BoJ, nor the FED for that matter, is willing to announce the kind of mulittrillion [US$] packages that would be necessary to "accomplish" these goals. Incrementalism will not work. Nor will "shock & awe," but at least that'll LOOK like it's working for more tha 2-3-4 days.

Orly's picture

Did Joseph Heller write this stuff?

Spalding_Smailes's picture

http://www.bloomberg.com/news/2010-10-04/boj-independence-challenged-for...

 

Increasing risks to Japan’s recovery prompted what may become the biggest threat yet to the Bank of Japan’s independence as politicians seek to redress its failure to end the deflation entrenched in the economy since 1998.

Your Party, an opposition group, plans to submit a bill in the Diet session running through December that would give the government a greater role in BOJ policymaking. Ichiro Ozawa, a former challenger to Prime Minister Naoto Kan whose calls for currency intervention and enlarged fiscal stimulus have been adopted by Kan, made a similar proposal last month.

Conrad Murray's picture

Not related, but after I read that article, I got to browsing around on Bloomberg and came across this:

http://www.bloomberg.com/news/2010-10-04/citigroup-ally-sued-by-homeowne...

Could we really be so lucky as to get some RICO action against these fucks?

Spalding_Smailes's picture

More from above article....

 

The Kentucky suit claims MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime.

“RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

The suit, which includes claims of fraud, also names as defendants other banks, real-estate law firms and document- processing companies.

In the Phoenix litigation, U.S. District Judge James A. Teilborg found that the mortgage banks properly named MERS as the nominee for the original lenders and that the plaintiffs didn’t include enough detail in their allegations that the banks formed MERS to conspire to deprive homeowners of their property.

tip e. canoe's picture

"That's the way things go when you elevate mediocre people to positions of authority."

knukles's picture

Hoooray!  Yipee!  Happy, happy, joy, joy!

The politicians take over!

We're saved!

pauldia's picture

Its a mad mad mad world, race around the world for the absolute bottom....

http://www.youtube.com/watch?v=VH4nVMJEopU

Pedro's picture

This ties into the Hugh Hendry interview on King News the other day where I believe he was talking about his Japanese short positions. 

Pedro's picture

$2 billion short position on Japanes credit to be exact.

99er's picture

Chart: USD/JPY

Backtesting the upper boundary of a Falling Wedge from which it has broken out. Bullish in theory.

http://99ercharts.blogspot.com/2010/10/usdjpy_04.html

chopper read's picture

apparently the BOJ is 'bigger than the market', so the 'fundamentals' agree.  

alien-IQ's picture

QE x Infinity? say it isn't so....

carbonmutant's picture

The FX boys think the EUR/USD is in the midst of topping off.

That should put a smile on Shirakawa's face...

Spalding_Smailes's picture

Ka-Boom'

 

Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans.

The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

“Defendants have filed foreclosures throughout the state of Kentucky and the United States of America knowing that they were not the ‘owners’ or beneficiaries of the loan they filed foreclosure upon,” the homeowners wrote in their complaint filed Sept. 28 in federal court in Louisville, Kentucky.

 

http://www.bloomberg.com/news/2010-10-04/citigroup-ally-sued-by-homeowne...

StychoKiller's picture

Who needs "Project Mayhem" when the Banks, Title Co.s, et.al. were busy strapping C4 onto themselves?

tip e. canoe's picture

vedddy interesting that MERS is based in Reston.

bada boom's picture

Quick, congress needs to pass some legislation to "help" the homeowner.

john_connor's picture

It appears we could have USD strengthen against EUR, JPY, AUD, and CHF all at once.  These countries/regions have been eating deflation, and I don't think they can absorb any more.  Fasten your seatbelts. 

chopper read's picture

a snapback in the USD would send our S&P to the toilet.  that is, until the backslap to the snapback from the Masters of the Universe at The Fed. 

traderjoe's picture

And didn't econ 101 teach these FinMin's that competitive devaluations hurt everyone?

And the BOJ directly lending to small and medium-sized businesses?

Gold will pop again on all of this...

Treason Season's picture

Citigroup, Ally Sued for Racketeering Over Database The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties. http://www.bloomberg.com/news/2010-10-04/citigroup-ally-sued-by-homeowne...

suteibu's picture

This is the story that made me laugh.

http://www.japantoday.com/category/commentary/view/boj-searches-for-reas...

The BOJ needs to find reasons for additional stimulus steps. But a number of sources have said those reasons must not be related to the yen’s recent sharp rise, over which lawmakers are attempting to force the bank into action.

‘‘We cannot accept being told (by the government) to undertake monetary easing in response to the yen’s rise,’’ a BOJ official said on condition of anonymity. Additional policy easing that could boost liquidity in the economy would not necessarily be effective, unless weak corporate appetite for fresh capital spending is addressed, the official said.

So, they don't want it to seem like they have lost their independence.  They are only fooling themselves.

Orly's picture

Yes.  Isn't it time the people got control of their own money?

suteibu's picture

Indeed.  In Japan and the US.

99er's picture

(Reuters) - The Bank of Japan is expected to ease monetary policy on Tuesday on growing evidence the strong yen is hurting a fragile economy, with bolder steps such as buying government debt or private-sector assets emerging as a strong option.

DoctoRx's picture

BOJ will do what the Fed tells them to do.  And we all have our strong suspicions about who tells Gentle Ben what to do. 

monopoly's picture

Even if the dollar moves up I think gold will hold and move higher. The entire planet is becoming infected again.

Not selling any gold or miners.

Nigaz's picture

Good night AUD, no rate raise.  Now to spin this into permabull recovery output...

gwar5's picture

At what point does a race to the bottom create less demand through loss of purchasing power and prices come down too? 

 

Orly's picture

Now, if the Euro would just trip the wire, all would be right with the world...

:D

Minion's picture

Euro is under stress and the technicals are ripe.  Gravity is universal.......

Orly's picture

Ireland on credit-rating watch...

Retail sales down 0.4%.

Will someone please 'splain how the EURJPY manages to hang at 115?  EURUSD at 1.38?  I know the old market is irrational thing but this bordering on the suprasurreal here.

Or maybe we have indeed entered the Twilight Zone...

/:

bada boom's picture

Your about in the middle, to the end of the best Twilight Zone show ever .  Don't worry, it will all make sense in the end.

Nigaz's picture

Hello... BOJ !

Nigaz's picture

You have been outbid, Mr Sack.

Raise?

Pillage's picture

tHEY JUST DID IT

bob_dabolina's picture

Thank you sir. May I have another?

Pillage's picture

The dollar is dropping faster than the Yen.......odd

Yellow_Paul_Frank_Monkeys's picture

not really though.. dx @ 78.69 & ES up about 2 points, I am thinking this is pretty much par for the course

Pillage's picture

Yen up, Dollar Down.........who did QE again?

Pillage's picture

5 minutes and counting until Yen is back above the point of announcement

http://finviz.com/futures_charts.ashx?t=6J&p=m5

bob_dabolina's picture

The market is not taking kindly to this.

Gold is lovin' it

roymunnson's picture

Wow! where does this end....GEEEEZ