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.