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π―π΅ Smell of sakura in an Asian market
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π Negative rates are a thing of the past. Ten years ago, the BOJ launched an unprecedented monetary stimulus experiment. Now Japan hopes that the new head of the Central Bank will stop the currency printing press.
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To support Β«AbenomicsΒ», BOJ chose a primitive, but not the most optimal path. The regulator greatly increased government securities purchases, thereby limiting government debt yield. The base interest rate was already negative, so the yen-printing presses were running at full capacity.
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As a result, BOJ has become the largest owner of stocks and bonds, with a balance of Β₯735 trillion. ($547 billion), which is equivalent to 130% of the GDP. Instead of bailing out the national economy, Japanese investment managers put in about $3 trillion. into foreign stocks and bonds, more than half of which ended up in the US. This group, which includes the country's largest insurance companies and pension funds, owns more than $1 trillion in US Treasury securities and bonds in Australia, France, the Netherlands and the UK.
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Inflation is now out of its comfort zone, with consumer prices rising 4% in December, double the BOJ target of 2%. Politicians urgently need to change the course of monetary policy and do it as delicately as possible so as not to scare the markets.
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This task will have to be solved by university professor Kazuo Ueda. But if the BOJ Bank of Japan raises rates too quickly, it could result in the repatriation of a significant portion of Japan's large foreign fixed-income investments.
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If Ueda unexpectedly maintains an easy money policy, it could backfire as investors start selling Japanese assets. This will be a serious blow to the image of the yen as a safe-haven currency and will lead to its fall against the dollar and other currencies.
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So now the only question left is when?
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Profits to yβall!