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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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Mon, 10/04/2010 - 19:53 | 624712 themosmitsos
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.

Mon, 10/04/2010 - 21:19 | 624819 MiguelitoRaton
MiguelitoRaton's picture

Race to the bottom Bitchez!

Mon, 10/04/2010 - 19:54 | 624715 Orly
Orly's picture

Did Joseph Heller write this stuff?

Mon, 10/04/2010 - 20:09 | 624728 Spalding_Smailes
Spalding_Smailes's picture


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.

Mon, 10/04/2010 - 20:58 | 624776 Conrad Murray
Conrad Murray's picture

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

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

Mon, 10/04/2010 - 21:02 | 624783 Spalding_Smailes
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.

Mon, 10/04/2010 - 20:59 | 624779 tip e. canoe
tip e. canoe's picture

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

Mon, 10/04/2010 - 21:06 | 624791 knukles
knukles's picture

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

The politicians take over!

We're saved!

Mon, 10/04/2010 - 19:58 | 624718 pauldia
pauldia's picture

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

Mon, 10/04/2010 - 20:21 | 624740 Pedro
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. 

Mon, 10/04/2010 - 20:29 | 624748 Pedro
Pedro's picture

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

Mon, 10/04/2010 - 20:25 | 624745 99er
99er's picture

Chart: USD/JPY

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

Mon, 10/04/2010 - 20:58 | 624777 chopper read
chopper read's picture

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

Mon, 10/04/2010 - 20:25 | 624746 alien-IQ
alien-IQ's picture

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

Mon, 10/04/2010 - 20:35 | 624751 carbonmutant
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...

Mon, 10/04/2010 - 20:57 | 624773 Spalding_Smailes
Spalding_Smailes's picture



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.

Mon, 10/04/2010 - 21:04 | 624788 frankTHE COIN
frankTHE COIN's picture

Ka-Boom duly noted.

Mon, 10/04/2010 - 22:17 | 624915 StychoKiller
StychoKiller's picture

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

Mon, 10/04/2010 - 21:15 | 624810 tip e. canoe
tip e. canoe's picture

vedddy interesting that MERS is based in Reston.

Tue, 10/05/2010 - 06:39 | 625343 bada boom
bada boom's picture

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

Mon, 10/04/2010 - 20:52 | 624763 john_connor
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. 

Mon, 10/04/2010 - 21:03 | 624786 chopper read
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. 

Mon, 10/04/2010 - 20:53 | 624765 traderjoe
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...

Mon, 10/04/2010 - 21:01 | 624766 Treason Season
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.

Mon, 10/04/2010 - 21:11 | 624800 suteibu
suteibu's picture

This is the story that made me laugh.

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.

Mon, 10/04/2010 - 21:18 | 624816 Orly
Orly's picture

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

Mon, 10/04/2010 - 21:24 | 624826 suteibu
suteibu's picture

Indeed.  In Japan and the US.

Mon, 10/04/2010 - 21:43 | 624860 99er
Mon, 10/04/2010 - 22:15 | 624908 99er
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.

Mon, 10/04/2010 - 22:50 | 624982 DoctoRx
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. 

Mon, 10/04/2010 - 22:57 | 624994 monopoly
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.

Mon, 10/04/2010 - 23:33 | 625037 Nigaz
Nigaz's picture

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

Mon, 10/04/2010 - 23:46 | 625053 gwar5
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? 


Mon, 10/04/2010 - 23:48 | 625057 Orly
Orly's picture

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


Tue, 10/05/2010 - 00:22 | 625099 Minion
Minion's picture

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

Tue, 10/05/2010 - 05:46 | 625308 Orly
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...


Tue, 10/05/2010 - 06:37 | 625341 bada boom
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.

Tue, 10/05/2010 - 00:40 | 625146 Nigaz
Nigaz's picture

Hello... BOJ !

Tue, 10/05/2010 - 00:42 | 625150 Nigaz
Nigaz's picture

You have been outbid, Mr Sack.


Tue, 10/05/2010 - 00:43 | 625152 Pillage
Pillage's picture


Tue, 10/05/2010 - 00:54 | 625163 Yellow_Paul_Fra...
Yellow_Paul_Frank_Monkeys's picture

Done and done.

Tue, 10/05/2010 - 00:54 | 625164 bob_dabolina
bob_dabolina's picture

Thank you sir. May I have another?

Tue, 10/05/2010 - 00:55 | 625165 bob_dabolina
bob_dabolina's picture


Tue, 10/05/2010 - 00:57 | 625167 Pillage
Pillage's picture

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

Tue, 10/05/2010 - 01:01 | 625170 Yellow_Paul_Fra...
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

Tue, 10/05/2010 - 05:14 | 625300 Pillage
Pillage's picture

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

Tue, 10/05/2010 - 01:02 | 625172 Pillage
Pillage's picture

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

Tue, 10/05/2010 - 01:06 | 625177 bob_dabolina
bob_dabolina's picture

The market is not taking kindly to this.

Gold is lovin' it

Tue, 10/05/2010 - 01:09 | 625183 roymunnson
roymunnson's picture

Wow! where does this end....GEEEEZ

Tue, 10/05/2010 - 01:14 | 625188 Pillage
Pillage's picture

My QE brings all the boys to the yard, damn right it's better than yours

The 1/2 life of QE on currency is about 20 minutes now

Tue, 10/05/2010 - 01:18 | 625193 Lapri
Lapri's picture

They just announced: 35 trillion yen special fund on their balance sheet, will buy government bonds, corporate bonds, commercial paper, index ETFs, REIT mutual funds.

Tue, 10/05/2010 - 01:22 | 625200 bob_dabolina
bob_dabolina's picture

More unemployment to come.....

Tue, 10/05/2010 - 05:09 | 625298 liberal sodomy
liberal sodomy's picture

Impotence, bitches.

Tue, 10/05/2010 - 01:21 | 625197 bob_dabolina
bob_dabolina's picture

This must have been expected and planned for QE by the FED.

This is just making the ground even for when Ben drops the nuke in Nov.


Tue, 10/05/2010 - 01:21 | 625199 Korg
Korg's picture

The way this is going it looks like Jim Sinclairs's 1650 gold in Jan might happen after all....

Tue, 10/05/2010 - 01:46 | 625221 pamriallc
pamriallc's picture
  BOJ Steps Up Asset Purchases, Lowers Benchmark Interest Rate

The Bank of Japan pledged to keep its benchmark interest rate at “virtually zero” until the end of deflation is in sight and to expand its balance sheet in an effort to shore up a slowing economic recovery.

The bank will create a 5 trillion yen ($60 billion) fund to buy government bonds and other assets, it said in a statement in Tokyo. It also lowered the benchmark interest rate to a range of zero percent to 0.1 percent, from the previous 0.1 percent target. Fourteen of 17 economists surveyed by Bloomberg News had instead predicted the BOJ would expand a bank-loan program.

Today’s move, labeled “comprehensive monetary easing” by Governor Masaaki Shirakawa and his colleagues, follows a slump in the outlook for economic growth in the BOJ’s quarterly Tankan survey last week. U.S. and U.K. central bankers are also debating expansions of their balance sheets as developed nations struggle to sustain rebounds from the deepest postwar recession.

“The Japanese economy is becoming fragile and warrants drastic monetary easing measures by the central bank,” Seiji Shiraishi, chief economist at HSBC Securities, one of two analysts in the Bloomberg survey who predicted a rate cut today’s meeting, said before the BOJ announcement.

Bond Purchases

Policy makers kept their credit program for banks at 30 trillion yen. While some politicians had urged the central bank to boost buying of government securities, the bank kept the target for monthly purchases of government bonds at 1.8 trillion yen. The statement said the debt bought through the new facility won’t be considered as applying to the BOJ’s rule for keeping its holdings at less than the value of banknotes outstanding.

Japan’s currency weakened after the announcement, slipping 0.4 percent to 83.66 per dollar at 2:11 p.m. in Tokyo. Business leaders have urged authorities to step up efforts to shield exports from the yen’s surge last month to a 15-year high. Authorities intervened last month for the first time since 2004, selling 2.12 trillion yen to stem the exchange rate’s gains.

Central banks around the world are weighing the need for more stimulus as growth cools. Chairman Ben S. Bernanke said this week the Fed’s large-scale asset purchases improved the economy and further buying is likely to help more. The European Central Bank stepped up its government-bond purchases last week.

While the Bank of England is forecast to keep its stimulus program at the current level this week, policy maker Adam Posen has advocated an expansion.

Wider Array

Today’s move widens the Bank of Japan’s arsenal of tools beyond the 30 trillion yen credit program, which extends funds to banks at the 0.1 percent benchmark rate. That facility had failed to halt a contraction in credit, and only about 20.8 trillion of the resource has been used so far, according to money-market brokerage Tokyo Tanshi Co.

“There would be little effect as far as pushing down borrowing costs further even if the central bank expands the credit program, which was just enlarged in August,” said Masaaki Kanno, a former BOJ official and now chief Japan economist at JPMorgan Chase & Co. in Tokyo.

Japan introduced the zero rate policy for the first time in 1999 and again in 2001, when it also adopted so-called quantitative easing, or targeted injections of funds into the economy.

Recent reports provide evidence the yen’s strength is hindering economic growth.

Production Decline

Industrial production unexpectedly declined for a third month and gains in retail sales were smaller than economists forecast, government figured released last week showed. The overall economy grew at less than half the pace in the April- June period compared with the previous quarter.

Further signs of weakening may emerge in coming weeks.

Japan’s economy will probably contract in the fourth quarter because the government’s incentives to subsidize energy- efficient cars expired in September and increased consumer spending due to an unusually hot summer will wane, said Kanno at JPMorgan.

Domestic new car sales in September fell for the first time in 14 months, the Japan Automobile Dealers Association said on Oct. 1. The government ended the subsidy program in the middle of the month because its budget ran out.

Governor Shirakawa suggested on September 27 he’s concerned about the risk of a “substantial” decline in production and consumption after the one-time effects fade.

“With overseas demand losing steam and policy incentive effects disappearing, Japan’s economic growth will definitely stall,” said Kazuhiko Sano, chief strategist at Tokai Tokyo Securities Co.



Tue, 10/05/2010 - 02:38 | 625248 Quantum Nucleonics
Quantum Nucleonics's picture

Not yet... just back to 0% interest rates.  Who knew they were not at zero already?

Tue, 10/05/2010 - 03:37 | 625267 Nigaz
Nigaz's picture

Gold says Domo Arigato.

Tue, 10/05/2010 - 04:23 | 625276 Nigaz
Nigaz's picture

It's so amusing to watch gold spike first, then the other non-dollar currencies follow (along with all correlated risk).  It's almost as if everyone knows that the Fed will not stand for this dollar strength; the BoJ just raised the stakes!

Yen is now considerably stronger than pre-TokoyoQE... Time for another visit (lesson) from Tiny Tim or the Big Beard himself.

Tue, 10/05/2010 - 04:29 | 625284 A Man without Q...
A Man without Qualities's picture

Japan's problems are ones of demographics, so unless they start cloning children, they should start importing workers from Korea or China and forcing them to take out huge loans on arrival...

Tue, 10/05/2010 - 06:04 | 625318 plocequ1
plocequ1's picture

Done deal. Gold up 10.00 to 1,327. Looks like Japan showed all those who said this cant be done. Its done until it cant be done anymore.

Tue, 10/05/2010 - 06:08 | 625326 Josephine29
Josephine29's picture

This proposed move from the Bank of Japan may or may not actually take place but it may support its exchange rate policy for a few days. As to QE being of some use to Japan's economy...

"However Japanese long-term interest rates are already much lower than anywhere else. For example her ten-year government bond yield fell yesterday from 0.95% to 0.9% which if it was going to do much good the falls in the past to 0.95% should have done so should they not? Japanese 30 year government bond yields are only 1.79%. As I have reported in the past in the section I have on the Japanese economic crisis  one of the main weapons of QE has done little good and looking further afield I feel that it is a lesson other policymakers should have learned from."

Tue, 10/05/2010 - 06:36 | 625342 malagawatch
malagawatch's picture

Oct. 5 (Bloomberg) -- The Bank of Japan pledged to keep its benchmark interest rate at “virtually zero” until deflation has ended after unexpectedly reducing borrowing costs for the first time since 2008 and expanding its balance sheet.

The bank cut the overnight call rate target to a range of 0 percent to 0.1 percent, the lowest level since 2006, from 0.1 percent, it said in a statement in Tokyo. Policy makers will set up a 5 trillion yen ($60 billion) fund to buy government bonds and other assets, inflating the balance sheet at a time when U.S. and U.K. central bankers are contemplating similar moves.

Tue, 10/05/2010 - 06:51 | 625351 SDRII
SDRII's picture

Nothing the ny sack exchange can't handle. Now for.a better than expected ism

Tue, 10/05/2010 - 07:13 | 625365 99er
99er's picture

Chart: USD/JPY

Looks like a channel...up.

Tue, 10/05/2010 - 07:33 | 625379 99er
99er's picture

Chart: AUD/USD

Hot under the collar down under?

Tue, 10/05/2010 - 07:59 | 625400 trav7777
trav7777's picture

Imagine me in a room with BOJ economists trying to explain something like contraction.

these economists and politicians are driven to the point of madness to try to perpetuate something which cannot be

Tue, 10/05/2010 - 12:31 | 626199 chopper read
chopper read's picture

they are attempting to circumvent the 'laws of financial physics'.  sorry, everybody, sometimes prices HALVE to come down.  :) 

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