By Tim Seymour
We remember Treasury Secretary Paulson’s reference to having a bazooka in his pocket ,but really it’s the Bank of Japan who is packing the heat and planning on using it.
Whether it can reap the desired result or backfire is unclear, but the amount of quantitative easing (QE) is staggering.
Japan, with an economy that is 1/3rd the size of the U.S., is buying approximately $70 billion in bonds a month, vs. the Fed, which is buying “only” $85 billion. The Bank of Japan is expected to raise its forecast for consumer price growth and get to its 2% inflation target sooner than expected (Spring 2015), according to folks who are forecasting their policy statement next week.
Recently, the Bank of Japan revised its outline of outright JGB purchases after meeting with market participants.
The central bank plans to buy more than 7 trillion JGB’s per month (about 7.5T/month) and carry out purchase operations about 8x per month v 5-6x prior. The yen at 110/USD remains an unstated goal of the Bank of Japan.
According to JPM, the impact of Bank of Japan action on Japanese stocks has been extreme: “The gap between buys and sells across margin trading in the Tokyo Stock Exchange is the highest since June 2006. Foreign ownership of Japanese equities at 28% is very close to the all-time high seen in mid-2007.”