Tag Archives: Bank of Japan

Japanese bond market, Japanese stock market, Market outlook

Explaining Japan’s deflation 2016: the cause is not just the consumption tax hike

Did Abenomics successfully save Japan from deflation? Not really. Will quantitative easing and negative interest rates by the Bank of Japan (BoJ) make it better in the future? Not very likely.

The BoJ is no longer controlling the monetary policy of the Japanese economy. The central bank has already taken all the effective options, and thus the room for expansion of easing is quite limited. There is something that decides the monetary policy instead of the central bank.

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Currencies, USD/JPY

USD/JPY forecast in 2016: the BoJ’s expansion and the Fed’s rate hikes will both decelerate

The dollar will fall, and the yen will strengthen in 2016. The Fed could not continue to raise rates, and the strong yen will be back again as the Bank of Japan’s monetary expansion is now limited.

There might be a number of investors who still bet on the yen’s fall due to Abenomics, but we recommend to reconsider. We even recommend to buy the currencies under quantitative easing, such as the yen or the euro.  Here are the reasons.

Continue reading USD/JPY forecast in 2016: the BoJ’s expansion and the Fed’s rate hikes will both decelerate →

Japanese bond market, Market outlook

Japan’s finmin Aso supports the debt monetization by the Bank of Japan

This is somewhat old information but surely illustrates what Japan thinks of quantitative easing. The following is a video of the Japanese financial minister Taro Aso in 2010 explaining why Japan’s huge public debt is not a problem:

In this video, Mr Aso asserts that Japan will not go bankrupt despite the huge public debt because debt monetization will clear all of it. This was when the Liberal Democratic Party was not ruling the parliament, and thus he was perhaps more frank to talk about what he actually thinks of the debt.

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Commodity markets, Foreign exchange market, Market outlook, US stock market

The financial markets in 2016: the forecast for stocks, bonds, currencies and commodities

The easy market for investors supported by the Fed’s quantitative easing is already over, and now the question is merely when, not if, the asset bubble bursts in several markets. The assets in a bubble are stocks, bonds and the dollar.

The Fed has ended its QE programme and is now in a process of raising interest rates. Will the US stock market be okay? It can never be okay as the central bank has injected trillions of money and is now going to retrieve it, but the market is manifesting groundless optimism.

The greatest premise investors believe in is the strong US economy and thus the strong dollar. However, the time is near for the uptrend of the dollar to be fading out. Why, how, and when? We will explain it in this article.

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Currencies, USD/JPY

USD/JPY: If the Fed postpones a rate hike, Japan’s QE expansion would also be delayed

As the Fed remains unclear about when it raises interest rates, the investors are starting to doubt the Fed’s will for a rate hike. The doller is getting weak, and the gold price rebounded.

In the global markets, we also need to note that one central bank’s policy affects another central bank’s policy, and at the moment, this is the most true with the Fed and the Bank of Japan.

The Fed’s aim

As we explained in the following article, the Fed is not waiting for the further improvement of the labour market, but we estimate its aim is the depreciation of the stock market itself:

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Market outlook, US stock market

S&P 500 could go down by 30% in 2015 to urge central banks to ease further

After the stock plunge in August, the global stock markets rebounded once, and they are now confirming their second bottom. The stock market plunge was essentially caused by the lack of the driving force for the global economies, proven by the Chinese slowdown, and it will continue until the authorities take any action, namely further monetary easing or financial stimulus.

2015-10-1-s-and-p-500-chart

However, if S&P 500 goes down by more than 20% from the peak, there would be a possibility that the central banks would rescue the financial markets. As we have been bearish about the stocks before August, we are also responsible to explain the future of this bear market.

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Market outlook, US stock market

Why 2015 resembles 1987 before Black Monday: central banks and rate hikes

After the radical plunge in the global stock markets in August, the stock prices rebounded once and are seeking its direction after this turmoil.

Investors are carefully watching what the central banks will do. Some of them first even expected the Fed might restart the QE, but after the Fed policymakers revealed to remain seeking a rate hike, this kind of subjective hopes disappeared. We already explained why they would remain hawkish:

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Foreign exchange market, Market outlook

Why the Fed is so hawkish and rushing to raise the interest rate

Recently, the Fed seems quite hawkish and rushing to raise the interest rate. According to Reuters, Mr Lockhart, Atlanta Fed President, insisted the point of “lift off” is close.

Although the GDP growth remains to be over 2%, the speed of the growth is weakened, and the CPI is still far from their inflation target of 2%.

This means there are other reasons for the rate hike than just the economic recovery of the country. The Fed is actually getting pushed to raise the interest rate by some other fear: the reverse flow of the portfolio rebalancing.

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Currencies, USD/JPY

2015-2016: Bank of Japan’s monetary base and timeline for QE and its expansion

Since the Bank of Japan started the massive quantitative easing in early 2013 and then expanded it in late 2014, it’s remained silent on whether or not they’re planning more easing in the future.

Will they plan further easing? Our answer is yes, but there are a few possibilities for the timing. At the earliest it will be from Sep to Dec 2015, or at the latest it will be 2017. We shall discuss the data to explain why.

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Currencies, USD/JPY

2015-2016: What will happen to USD/JPY when the BoJ expands the QE further?

As the BoJ only claimed it would continue its quantitative easing until mid 2016, investors are now speculating whether the central bank extends the easing or not.

In this article, we discuss the impact of the QE extension/expansion to USD/JPY to clarify if the BoJ has an effective means to affect the currency market to support the inflation. We first review the chart of the monetary base ratio:

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