When ¥11 Trillion Is Not Enough: Japan's QE 9 Disappoints, Halflife Zero, Time For QE 10

Tyler Durden's picture

It was only yesterday that we pointed out the ever decreasing halflives of central bank interventions. We are grateful that none other than the biggest intervention basket case of all came out and proved us 100% correct, when the BOJ announced none other than QE 9 just one month after the impact from QE 8 fizzled about 8 hours after it was disclosed. This time around, the destructive "benefit" to the JPY was negative from the first second, resulting in the first instance of monetary easing that.. wasn't. Japan just came up with a brand new New Normal concept: tightening through easing, when its ¥11 trillion intervention proved to be woefully insufficient for a market addicted to ever more liquidity injections.

First, this is what QE 9 formally was (full statement here):

The assets affected by QE 9 were across the board. The BOJ would monetized the following assets:

  • JGBs: + ¥5 trillion
  • Bills: + ¥5 trillion
  • ETFs: + ¥0.5 trillion
  • Corporate Bonds: + ¥0.3 trillion
  • CP: + ¥0.1 trillion
  • Japanese REITs: + ¥0.01 trillion

Alas all of this was for nothing, and as we showed previously, the USDJPY, which had been trading at 80.00 before the announcement, ad dropped immediately by 50 pips on the announcement of QE 9, presenting the first zero (effectively negative) halflife monetary intervention ever!

"The 10 trillion-yen increase was seen as a minimum expansion, and the failure to reach 15 trillion yen is very disappointing for markets," said Yunosuke Ikeda, head of Japan foreign-exchange research at Nomura Securities Co. in Tokyo. "The yen is being bought as risk sentiment is worsening in part because of Sandy." But at least US futures are pretending to be distracted for now, and while QE 9 failed in Japan, it has succeeded in its primary job: to push America higher, if only briefly.

And a full post-mortem of the now failed, for Japan, QE 9 from SocGen:

BoJ increased the APP by about 11 trillion yen

The BoJ decided to increase the total size of the Asset Purchase Program (APP) from about 80 trillion yen to about 91 trillion yen. Among the increased amount, 5 trillion yen will be directed at JGBs, 5 trillion yen at t-bills, 0.1 trillion yen at CP, 0.3 trillion yen at corporate bonds, 0.5  trillion yen at ETFs, and 0.01 trillion yen at J-REITs. The increased purchases of assets will be completed by December 2013. The market was expecting an increase in APP by at least 10 trillion yen in JGB and T-bills, plus some risk assets. Therefore, today’s announcement turned
out to be broadly as expected.

Second easing within one month

Last time the BoJ took additional easing action was only a month ago in September. Over the past month, economic conditions have worsened further. Political tensions with China over the island dispute have led to an unexpectedly serious economic slowdown, as many Chinese are boycotting Japanese products. Moreover, since the cabinet reshuffle at the beginning of October, there has been increasing political pressure on the BoJ to act with stronger monetary easing policy. For these reasons, the BoJ could not just wait and see the implication of the September action - the BoJ had to take action towards further easing.

Cooperation with government to fight deflation

In addition to the monetary policy statement, the BoJ released a separate report on “Measures Aimed at Overcoming Deflation”, which explains the shared understanding of the roles of the government and the BoJ. In this report, the BoJ confirms that it will continue with powerful easing until it judges the 1% CPI goal to be in sight - mainly by conducting virtually zero interest rate policy and implementing APP through the purchase of financial assets. The government also expects the BoJ to continue powerful easing until deflation is overcome, and to take economic policy measures to counter risks of an economic downturn.

It is unusual to publish a separate statement in cooperation with the government regarding monetary/economic policy. This is probably a result of increased pressure by the government on the BoJ to be more aggressive in fighting deflationary environment. However, in our view, it is simply a commitment which is interesting theoretically, but will probably not have any immediate impact on the economy.

Establishing a new framework to stimulate bank lending

Furthermore, the BoJ decided to provide long-term funds at a low interest rate to depository financial institutions in order to promote the supply of credit to firms and households. The total amount of funds provided will be unlimited, and the interest rate will be a long-term fixed rate equivalent to BoJ’s target for uncollateralized overnight call rate at the time the loan is granted (currently 0.1% per annum). The duration of loans will be 1 to 3 years, and can be rolled over up to 4 years.

This new facility is similar to the BoE’s measure to facilitate funding for lending. However, Japanese banks are currently not suffering much on the funding side, and the impact is likely to be less than in the UK. That said, in our view, it does have a significant impact from the point of view that the interest rate will be fixed long term, which would free the banks from any interest rate risk on their loans. The BoJ governor explained in a press interview that details of the facility will be discussed further by the end of December.

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SWRichmond's picture

This is the essence of the "race to the bottom."  Failure to intervene results in economic collapse, with the attendant collapse of tax revenues, with the attendant collapse of bond payments / bond markets.  Result: the currency collapses.  Intervention results in higher prices, flight from bond markets, collapse of bond markets.  Result: the currency collapses.

As the time value of the interventions collapses, the currency collapse looms.

Ghordius's picture

I disagree. as far as I know a currency collapses when it's foreign supply collapses in FX, i.e. when a central bank is unable to "mop up" it's foreign holdings and so keep their price in other currencies stable.

unlikely that this happens to the Yen that soon, they have FX reserves for that. this is the whole point about FX reserves

SWRichmond's picture

Ah, the "FX Reserves" fallacy.  After all, managed economies work just great, don't they?  "My currency is fine as long as yours is.  I can manage my currency using the value of reserves I hold in your currency."

This is akin to saying "Everything will be OK as long as BoJ and the Fed print equal amounts.  Everyone, keep your eyes on the FX indices."

That certainly is the company line, isn't it?  Lemme know how that works out for ya.

Ghordius's picture

fallacy? you mean "this time is different"? I'm not aware of any fiat currency that died in it's zone first. and history has lots examples of currencies that collapsed abroad, first, and then in their own zone. often with a quite considerable time lag

a growing concern's picture

"Fool me 8 times, shame on you.  Fool me 9 times... won't get fooled again."


francis_sawyer's picture

You Only Live Twice... Oh Wait...

OpenThePodBayDoorHAL's picture

Loved the Bond girl in that one...but I pretty much loved all the Bond girls. My top favs are Sophie Marceau, Eva Green, Carole Bouquet, Jane Seymour...and of course Ursula Andress

Wm the Shrubber's picture

Absolutely beautiful!

icanhasbailout's picture

the choices are becoming ever more binary

Zero Govt's picture

yes, and ever more electronic

How does multiplying some electrons on Ben's office PC stimulate the outside wider real economy?!

Is there any science to back this magical alchemy up, or this another Krugmanesque wacko theory

TheSilverJournal's picture

It's theft sold as stimulation. The central planners want to be the ones controlling the distribution of your resources, simple as that.

Mattress Money's picture

Excuse my ignorance, but why is everyone destroying their currency, Looked what happed to the USSR

mvsjcl's picture

Orders from Basel, relayed through New York.

GetZeeGold's picture



Looked what happed to the USSR


They screwed up Moscow so bad they decided to move to Wahington DC...gotta figure the second time's a charm.

Sheeple Shepard's picture

They have to do something and currency de-valuation is the tried and tested way to "default" whilst benefiting the people who own the most assets ie the rich.
Paying off your debts and going bankrupt is for serfs.

Ghordius's picture

they are not destroying them, they are spending them for political purposes. the process started in 1968 when we all still had a "as good as gold" USD global reserve currency that was convertible to gold (only for non-US entities), one million bucks for one ton of gold.

past 1968, the US had not enough gold to cover the dollars outside America (at that price). 1971 Nixon stopped the conversion because "ze bloody foreigners" were getting cold feet. since then we are engaged in a "currency war" that flares up a bit, from time to time.

foreign countries have all one problem: how to keep their economies intact during this decline. according to each country's strategy, this means "competitive devaluation rounds" as the situation compels them to do it. of course matching is political fun, then you can accomodate lots of extravagant wishes with this special tax/spending

simplified and in a nutshell

Josephine29's picture

I guess that if the Bank of Japan was uncertain its mind was made up by the shocking industrial production figures highlighted below.

Japanese Industrial Production

We saw data released from Japan’s METI today and this may well have added to the Bank of Japan’s desire to act as the numbers were once again poor.

Industrial Production in September decreased 4.1% from the previous month, showing a decrease for the third consecutive month. It showed a decrease of 8.1% from the previous year. The index in September was 86.5(seasonally adjusted).

And we also got some detail on what had caused this.

Industries that mainly contributed to the decrease are as follows: 1.Transport equipment, 2.General machinery, 3.Iron and steel, in that order

Even if we try to make an allowance for the territorial dispute with China in the East China Sea these are weak numbers.


The trouble is that as the article goes on to point out Japan keeps trying this....

GreatUncle's picture

When you use QE to ease the dam problem the whole economy changes so that using QE becomes the new normal.

Does nothing but delay the day when the QE has to stop. Unless you are going to continue it forever.

Zero Govt's picture

" Japan's QE 9 Disappoints, Halflife Zero, Time For QE10 "

They took Timyas advise, peddle to the metal...

..or village idiots banging their heads against a brick wall as it's known in sane society


Debtonation's picture

They obviously just need to go full blown retard and lauch QEternity to fix everything.

MsCreant's picture

So when Japan was getting Fuc't in Fukushima, didn't Central banks around the world cooperate in various swaps and other maneuvers to keep the system afloat? Wonder what all will be done to "protect" us as NY goes down (if not out).

Zero Govt's picture

NY could be down for nearly a week, but presumably the Fed has back-up diesel generators to keep the electrons flowing into underwater Wall Streeters pockets

at $40bn a month Ben's getting through alot of diesel to keep WS running

q99x2's picture

Why don't they make it like a gas pedal on a car. Or a joystick on a computer where they push it untill it has an effect. But if the effect is negative maybe it would make it more negitiver. They should start pumping it into the citizens accounts instead of the banks. Got my fingers crossed.

GetZeeGold's picture



Yeah.....that's gonna happen.

Incubus's picture

the only kind of pumping we'll get is bullets into the back of the head, gas into the chambers we're piled into, or the pumping from the uniformed thug that's got us pushed over.



timbo_em's picture

So QE10 is just around the corner?! But then they want to suprise the market and intervene with some 18T Yen to re-create at least several minutes of halflife. Peak desperation in an otherwise broke country.

Overflow-admin's picture

Looks like it could be a playground for High Frequency ^^

semperfi's picture

I've got a $100 Trillion bill from Zimbab that I can send them - that'll shock 'em !

nofluer's picture

Insanity = doing the same thing over and over again and expecting different results = Japanese Monetary Policy = US Monetary Policy = Global Monetary Policy...

edifice's picture

Just print a quadrillion Yen and get it over with.

patb's picture

11 trillion yen is about 100 billion dollars.  


half were purchases of JGB,s and the rest was corporates.  


It's just a liquidity trap, as inerest rates are zero, these kinds of operations become very marginal, because you are buying at close to face anyways.  


unles japan wants to go into negative interest and start pushing that, there is no impact.


what's really bad is that the day real inflation kicks in the whole mess collapses