Yesterday at 2am local time, Japan’s Nikkei reported a doubling of stimulus being proposed (to 6 trillion yen) after Goldman suggest 3 trillion was not enough. That spiked USDJPY briefly. Today, at 2am, Nikkei decided to try it again… announcing that “BoJ officials said to be leaning more toward easing,” and sure enough USDJPY spiked…
Support is growing within the Bank of Japan for further monetary easing ahead of the two-day policy board meeting set to begin Thursday.
Such new easing would complement an upcoming government spending package, bolstering efforts to shore up Japan’s economy and prices amid mounting global uncertainty stirred by issues including the U.K.’s vote to leave the European Union.
Top officials are looking at multiple proposals. The main options are to cut interest rates beyond the current level of minus 0.1%, buy more Japanese government bonds on top of the current 80 trillion yen annually or expand purchases of other assets, such as exchange-traded funds.
As Bloomberg summarizes:
- Commercial banks oppose further negative rates
- Some govt officials advise against further negative rates
- Still, ETF purchases alone seen as insufficient
- Some in bank are starting to argue for more cooperation with govt
- Other policy board members likely to object to any of the proposals, saying current policy is still working and current level of cooperation is sufficient
So absolutely nothing new, but just enough to get the algos moving and generate some positive momentum. It didn’t work yesterday, and for now doesn’t seem to be working today.
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