BoJ Conducts Survey, Promptly Ignores Results

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.