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In recent weeks, many commentators felt that the MoF has been preparing to unleash another massive round of intervention in order to reverse yen strength. As such, last night’s announcement from the BoJ that it was adding another JPY 10trln (GBP 82bln) to its asset purchase program was a surprise, with USD/JPY now back up above 78 once more. Separately, the BoJ also declared an explicit inflation target of 1%. With the economy declining by an annualised 2.3% in the final quarter of last year, the BoJ was under pressure to respond.
These days, quantitative easing is the policy de jour for the major global central banks. The BoE has just announced a third round of asset purchases, the Fed has intimated that it may also be prepared to implement another dose of QE, and the ECB is rapidly expanding its balance sheet by providing Europe’s troubled banking sector with access to unlimited funding. Although investors and traders alike are (rightly) deeply troubled by this deliberate currency debasement in the western world it is, unfortunately, an unavoidable consequence of balance sheet-deleveraging.
We had better get used to it. There is plenty more where this comes from.
