The weakening Japanese economy and concerns that the country is heading towards deflation led the Bank of Japan to announce further monetary easing measures yesterday. This is the second month in a row that the BoJ has unveiled new money printing measures, an unusual step. Its asset purchases are increasing by Y11 trillion ($138bn) to a total of Y91tn.
Ironically, what ZeroHedge calls “QE9” from the BoJ actually led to a 50-pip drop in the USDJPY – not exactly the result that the Japanese were after. USDJPY is currently trading around where it was at the end of last week. A Nomura source was quoted saying that Y10tn was the minimum market expectation: “the failure to reach 15 trillion yen is very disappointing for markets.” A perfect example of how equity markets are becoming addicted to central bank largesse, and how such interventions are subject to the law of diminishing returns. Such programmes need to get bigger and bigger if they are to succeed in forcing asset prices higher. The BoJ is learning this lesson the hard way.
The yen is also attracting some safe-haven bids on the back of the storm that struck the US east coast on Monday night. Though New York markets remained closed yesterday because of flooding (only the second time the weather has forced a two-day NYSE closure since 1888), risk appetite has returned slightly on news of better-than-expected Q3 corporate earnings in Europe and Asia. This has pushed the Dollar Index below 80.00, and encouraged precious metals buying. Gold has gained $11.70 over the last 24 hours, and is nudging above $1,720, while silver has gained over 50 cents, and is heading back towards that oh so familiar resistance zone around $32.50-$33
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Bank Of Japan Move Disappoints Markets
Published 10/31/2012, 08:29 AM
Updated 05/14/2017, 06:45 AM
Bank Of Japan Move Disappoints Markets
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