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BoJ Conducts Survey, Promptly Ignores Results

Tyler Durden's picture




 

Less than a week after former BoJ official Yuri Okina warned that Japan’s bond buying program was having a “huge” impact on market liquidity, a new survey from the BoJ itself shows nearly 70% of financial institutions believe the market is impaired thanks to central bank asset purchases. 

Via Reuters

The majority of Japanese government bond dealers think that the bond market is not functioning well and that bid-ask spreads are not very tight, a Bank of Japan survey showed today. 

 

The BOJ surveyed 40 financial institutions that are eligible to participate in JGB market operations, in order to better understand how its purchases of government debt via its quantitative easing are impacting the market. 

 

There are lingering worries that the BoJ's quantitative easing is hurting bond market liquidity [as] more than 60 per cent of firms [report] having some or a lot of trouble fulfilling orders.

It appears that monetizing the entirety of gross JGB issuance distorts markets after all and we can’t help but reiterate that wide bid-asks (i.e. impaired price discovery) lead to volatility which, if you’re Japan, could in short order collapse the entire ponzi scheme and shatter the Keynesian illusion in the process. As we’ve noted on a number of occasions, it certainly appears as though the BoJ is indeed losing control of not only the market, but the narrative as well. For evidence of this, look no farther than a simple chart of the yield on JGB 10s: 

The punchline: the BoJ doesn’t seem to care about the results of its own survey. Here’s Reuters, summarizing comments from the BoJ’s number two, Hiroshi Nakaso:

The Bank of Japan must ease monetary policy further if oil price falls hamper its efforts to ramp up inflation expectations, its deputy governor said, stressing the central bank's readiness to top up stimulus to hit its ambitious inflation target.

So, again: more cowbell. 

 

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Mon, 03/09/2015 - 21:19 | 5871704 i_call_you_my_base
i_call_you_my_base's picture

At some point Japan will drink from a fire hose.

Mon, 03/09/2015 - 21:23 | 5871713 Newsboy
Newsboy's picture

"Don't ask questions you don't want to know the answer to."

Mon, 03/09/2015 - 21:46 | 5871760 remain calm
remain calm's picture

Who the fuck are they kidding. They will not stop bond purchases when they hit 2% or 3% or 4% inflation. They have no other card to play. They are just buying time and the business media is too stupid to understand.

Mon, 03/09/2015 - 21:26 | 5871721 MsCreant
MsCreant's picture

Will the liquidity kill them or the radiation? They are our petri dish of experimental horrors right now. More than one test going on does not allow for controlled conditions though.

Mon, 03/09/2015 - 23:21 | 5872031 TheReplacement
TheReplacement's picture

Hell, they are about to remove the hose and suck on the main.

Mon, 03/09/2015 - 21:24 | 5871710 suteibu
suteibu's picture

BOJ must act if oil falls affect inflation expectations: deputy governor

High oil prices bad for business and consumers...low oil prices good for businesses and consumers but bad for government. 

Bizarro world.

Mon, 03/09/2015 - 21:32 | 5871734 MsCreant
MsCreant's picture

Bizarro is relative. We were sold a fairy tale called capitalism where markets were based on supply and demand and other "fundamentals." Manipulation is not the new normal, it is simply normal (or so I think I have figured out for the moment). They don't tell us that part of the story, it does not sell well.

We call it bizarre when really we are just disillusioned.

There are checks and balances, but no one is checking so there is no balance.

Mon, 03/09/2015 - 21:35 | 5871740 XqWretch
XqWretch's picture

Sounds like my bank account

Mon, 03/09/2015 - 21:57 | 5871806 suteibu
suteibu's picture

"We were sold a fairy tale called capitalism where markets were based on supply and demand and other "fundamentals."

Quite so.  Disillusioned and disappointed.  And pissed.

When Kan took office in Japan, one of his first announcements was that he wanted to "financialize" the Japanese economy.  Of course, few knew what that meant.  It seems Abe continues the plan.  It ain't just American and European politicians and bureaucrats who have been bought out.

Mon, 03/09/2015 - 23:25 | 5872043 TheReplacement
TheReplacement's picture

Manipulation is the norm.  You cannot ignore human nature.  Human nature leads some to strive for advantage over others.  No system can control or prevent human nature.  This was the point of the American Revolution.  Tear down the structure that allows some to have advantage over others, reform and start over.  It isn't a one hit wonder.  The rinse has to be repeated every couple of batches or the keg gets nasty.

Mon, 03/09/2015 - 23:49 | 5872093 MsCreant
MsCreant's picture

I so agree, did not put this material in my post because it would have been too long. But if we are open and honest about our nature, accept the selfish beasts that we can become under the proper conditions, we could actually do some of this collective stuff effectively. Until then, not a chance in hell. Founders were geniuses, wise, or really honest with themselves. Maybe some of all of the above.

Mon, 03/09/2015 - 21:43 | 5871746 BrosephStiglitz
BrosephStiglitz's picture

Ah, the daily BoJ doom-porn.  As I have previously stated, I have a bet that Japan will default (awful I know, to bet against such things), but I was drunk at the time of agreement.

Was pleasantly surprised after sleeping off the hangover that I added a six month error margin (time-wise) onto the bet terms. I am sensing that the market is probably primed for a collapse in confidence.  Armstrong will probably be right in that an external factor will send this domino toppling over. It is true what he stated yesterday, that their debt is held almost exclusively WITHIN Japan itself.

Still, confidence is swirling the drain and I see the makings of crisis looming, but hey, misery loves company and Japan will probably not be alone.  Tick-tock.

Mon, 03/09/2015 - 23:30 | 5872054 TheReplacement
TheReplacement's picture

Does not Japan hold much US debt?  If they go belly up, what will they sell to make ends meet?  Will then China not want out of US debt as it is going down?  ECB will be the buyer of last resort over the next two years?  What happens when even the ECB ship of fools starts to leak faster than they can print patches?  Will the Fed start buying (openly) again?  What happens then?  Did I miss something?

Tue, 03/10/2015 - 05:01 | 5872444 kiwimail
kiwimail's picture

No worries, Belguim will step up to buy them all!!!

Tue, 03/10/2015 - 05:41 | 5872472 BrosephStiglitz
BrosephStiglitz's picture

I am not stating that other regions will not fall first, or will be unaffected.  It isn't Japan only which is at risk.

Impossible for nations which are tangled up in a web of debt instruments to not be affected by one region collapsing. 

Mon, 03/09/2015 - 23:19 | 5872027 robnume
robnume's picture

Ease monetary policy even more...yeah, BOJ, that oughta help. Fucking morons! Blow up, already!

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