Updated: 2:25pm New York time 04 April 2013
Econintersect: Haruhiko Kuroda, the new governor of the Bank of Japan (BoJ) has announced an aggressive increase in the central bank's qunatitative easing programs. Monthly bond purchases will rise from the current ¥4.2 trillion per month to ¥7 trillion ($76 billion). The new purchases will greatly increase maturity of bonds purchased, with some up to 40 years maturity. The objective is to increase the aaverage mautrity of the central bank portfolio from 3 years now to 7 years. The previous governor, Masaaki Shirakawa, had the program buying mostly short-term debt.
The new program will lead to a doubling of the monetary base, according to the Financial Times. The Japnese prime minister Shinzo Abe, has called for the country's inflation rate to be raised to 2% within two years. The country has been moving back and forth across the zero inflation line for years.
A BoJ statement was quoted by the Financial Times:
“The quantitative and qualitative monetary easing, introduced by the bank today, will underpin the bank’s commitment, and is expected . . . to drastically change the expectations of markets and economic entities.”
The Daily FX reports that the Yen dropped nearly 1.4% to trade at 94.125 just 25 minutes after the announcement. Investing.com has streaming forex quotes and the yen had degraded further to 94.45 to the U.S. dollar as this was written.
The Tokyo stock market is trading up 1.3% after being down 1.7% before the announcement.
Update (2:25pm 04 April 2013): Warren Mosler has posted "Bank of Japan aggressively pretends to ease".
The Nikkei 225 continued rallying into the close on 04 April 2013 to close 2.2% higher on the day. The reversal from the lows early in the day amounted to almost a 4% rise.
The latest data from Investing.com shows the yen continuing to fall, now 96.13 against the dollar. This is a decline of 3.33% against the U.S. dollar, a monumental move for a 24 hour period.
In spite of the decline in the yen the ETF for Japan (NYSE:EWJ) traded higher so far today by 4.2%. Since the Nikkei 225 is reported in yen and EWJ is report in dollars, the gain for EWJ is surprising. In dollar terms the Nikkei 225 has gained only about 0.6%.
- Bank of Japan to double monetary base (Ben McLannahan, Financial Times, 04 April, 2013)
- Yen Weakens as BoJ Introduces Qualitative and Quantitative Easing (Christopher Almeida, Daily FX, 04 April 2013)