Tuesday, April 9, 2013

Taking QE to a whole new level

The Bank of Japan is taking the concept of quantitative easing to a whole new level. Unlike the Fed who is only focused on treasuries and agency MBS securities, the BOJ is authorized to purchase ETFs and REITs in addition to JGBs.
Reuters: - "The BOJ can buy whatever amount of ETFs and REITs it can. It can even buy government bonds more forcefully, as if it were to buy the entire amount in markets," Hamada said in an interview with Reuters.

"There are also other various measures, although the BOJ must also be mindful of the drawbacks."
According to Credit Suisse, the BOJ's balance sheet as a proportion of the nation's GDP will far outstrip that of the other major central banks (excluding the SNB) within the next two years. This is uncharted territory - nothing of this magnitude has been tried before in a developed economy.  As a result, dollar/yen is at 99 (the yen is down some 25% over the past 6 months) and Japan's stock market just hit a 5-year high.

Source: Credit Suisse

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