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"Ze Price Stabeeleetee": The Market Impact Of The BOJ's Interventions

Tyler Durden's picture




 

Because when your primary stated goal is achieving "price stability" through unprecedented intervention, and instead you break the markets (both bonds and stocks) it may be time to reevaluate.

As a reminder: "The Bank of Japan, as the central bank of Japan, decides and implements monetary policy with the aim of maintaining price stability. The Bank of Japan Act states that the Bank's monetary policy should be aimed at achieving price stability, thereby contributing to the sound development of the national economy."

Instead, you get this...

Some more from the Bank of Japan on the topic of stable prices:

Price stability is important because it provides the foundation for the nation's economic activity. In a market economy, individuals and firms make decisions on whether to consume or invest, based on the prices of goods and services. When prices fluctuate, individuals and firms find it hard to make appropriate consumption and investment decisions, and this can hinder the efficient allocation of resources in the economy. Unstable prices can also distort income distribution. For example, in times of high inflation, people holding only financial assets whose value is fixed in nominal terms, such as bank deposits, will suffer a decline in the value of these assets in real terms.

Instead, we get this. From the BIS:

The shift in Japan’s monetary policy dominated financial markets during this period. On 4 April, the BOJ announced a new operational framework designed to lift inflation to 2% over about two years (see Box 1). Immediately after the announcement, equity prices rose and the yen depreciated. Meanwhile, the price of JGBs turned extremely volatile, as investors needed to digest the implications of the unexpected scale of future JGB purchases across different portions of the yield curve. On 5 April, the yield on the 10-year benchmark bond dropped to a low of 32 basis points, before rebounding to twice this level in a single trading day. The  sharp increase in the volatility of JGBs reflected considerable uncertainty about the future market impact of the policy shift, exacerbated by a drop in market  liquidity. In response, the BOJ undertook one-year funding operations to provide a stable funding source for market participants’ risk-taking, enhanced  communication with market participants and revised its way of conducting JGB purchase operations. This helped ease volatility in the JGB market, at least temporarily.

We assume the last sentence excludes the 20 or so Japanese bond trading halts in the past two months, as well as the intraday 10% price swing in the Nikkei two weeks ago.

But hey, at least the BOJ is fully intent on preserving "ze price stabeeleetee"

 

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Sun, 06/02/2013 - 20:24 | 3619100 ekm
ekm's picture

Japan is the typical example of an international situation handled day by day, without any plan whatsoever, since frankly, at this point it's impossible to plan out anything.

 

Panic, pure panic

I strongly think that NY Fed helped them out, since japan's plunge protection team is inexperienced and probably shortstaffed.

 

Sun, 06/02/2013 - 20:55 | 3619162 MythicalFish
MythicalFish's picture

 

 

They do have the finest plunge protection team in the world.

http://williambanzai7.blogspot.com/2013/04/yamagucci-qe.html

 

Sun, 06/02/2013 - 21:06 | 3619183 ekm
ekm's picture

LOL

Sun, 06/02/2013 - 20:23 | 3619105 Yen Cross
Yen Cross's picture

  I shot the gap , aud/jpy for 50 pips . held my aud/jpy trade for the carry on Friday. Sweetness.

Sun, 06/02/2013 - 20:25 | 3619107 lolmao500
lolmao500's picture

Price stability. Japan should be happy, the last 20 years were a total success... no inflation, their currency even got stronger!

The real scam is the ``2% inflation is price stability`` BS line that the MSM and the fed have been saying for the last 100 years.

Sun, 06/02/2013 - 20:29 | 3619115 PiltdownMan
PiltdownMan's picture

Some are expecting a big Japanese rally. I am expecting a hell storm.

Sun, 06/02/2013 - 20:30 | 3619116 EclecticParrot
EclecticParrot's picture

"My meestake, eeets axechulee fewteeletee"

Sun, 06/02/2013 - 20:34 | 3619130 Yen Cross
Yen Cross's picture

   I favor male Canary's in the mines.

Sun, 06/02/2013 - 21:07 | 3619191 EclecticParrot
EclecticParrot's picture

Of course, as females of the species don't sing.  

Ask any miner, and they'll tell you nothing makes the work day more enjoyable than a strong-throated canary carefully trained by forward-thinking colleagues to belt out Philip Glass arpeggios nonstop . . .

Mon, 06/03/2013 - 01:02 | 3619604 Yen Cross
Yen Cross's picture

   Be well.

Sun, 06/02/2013 - 20:33 | 3619124 medium giraffe
medium giraffe's picture

Some good work there by the BOJ, those prices are as stable as a light water reactor on a fault line.

Sun, 06/02/2013 - 20:33 | 3619128 Burr's 2nd Shot
Burr's 2nd Shot's picture

Dead is pretty stable.

Sun, 06/02/2013 - 20:37 | 3619132 Yen Cross
Yen Cross's picture

        F/X repositioning happening. Losing interest in gbp/usd.

Sun, 06/02/2013 - 20:38 | 3619133 Bay of Pigs
Bay of Pigs's picture

"You wreck me baby, yeah, you break me in two"

Tom Petty and the Heartbreakers 

Sun, 06/02/2013 - 20:42 | 3619139 LetThemEatRand
LetThemEatRand's picture

I think what bothers me most about the last few years is the flagrant dishonesty.  Obviously the BOJ knows that it is not maintaining price stability.  It is sad that people sit down and take this up the ass year after year.

Sun, 06/02/2013 - 20:48 | 3619151 NoDebt
NoDebt's picture

That's it exactly.  Price stability was NEVER the goal.  Like just about everywhere in the devoped world the bad debts have now been pushed up to the national level.  They print to pay the ever increasing debts.  That's it.

Sun, 06/02/2013 - 20:44 | 3619142 WTFUD
WTFUD's picture

long saki short sushi

Sun, 06/02/2013 - 20:46 | 3619145 ziggy59
ziggy59's picture

Huh? Japanese companies Q1 sales fell 5.8% on year and Q1 profits rose 6.0% on year

Sun, 06/02/2013 - 20:55 | 3619163 Yen Cross
Yen Cross's picture

 GBP/AUD > Gotta love it!

Sun, 06/02/2013 - 21:18 | 3619209 WallowaMountainMan
WallowaMountainMan's picture

i'll be so glad when the 24 hours aday algo takes over, figures everything out, and dies from lack of something to do.

Mon, 06/03/2013 - 00:30 | 3619585 Non Passaran
Non Passaran's picture

I wonder about Kuroda's desktop - what kind of porn it's showing and whether the s/w is the same version (same bugs, too) as the Fed's...

Mon, 06/03/2013 - 01:01 | 3619603 Yen Cross
Yen Cross's picture

NORKS.  ZH is being Norked

Mon, 06/03/2013 - 06:31 | 3619750 d_taco
d_taco's picture

You better run a Budget deficit than a foreign sector deficit (== current account surplus) unless you believe the US will pay back all its debt.

The zero-hedge pay master does not want you to understand the real Japan problem

Japan did save a staggering amount in foreign assets.

The current account deficit it runs for year was financed by the loans it issued.

Now the money move starts to reverse, this explains the rise in the Yen since 2009.

It means the US has to pay back its dept to Japan while it  will misses extra investment.

This deleveraging means the US has to produce more and consume less.==> Work harder receive less!!!

The actions of the BoJ will do nothing to prevent this process that is generated by demographics in Japan.

JGB Yield will go to 0 US-YEN spike will be temporarily.

No inflation in Japan

Japan government debt will rise to 300% this is strategically more clever than keep on running a current surplus.

 

Mon, 06/03/2013 - 08:40 | 3619861 RobM1981
RobM1981's picture

Paging Paul Krugman... paging Paul Krugman.... Mr. Krugman, there's a telephone call for you in the lobby. Your experiment is over; you've broken Japan.

Do NOT follow this link or you will be banned from the site!