Forex Flash: The BOJ shakes it up (a lot) - Societe Generale

FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that the BoJ has joined the easy money crowd with a vengeance.

He begins by commenting that between the end of 2012 and the end of 2014, the BOJ will increase its holdings of JGBs by Y100trn and increase the size of its balance sheet by even more, taking it to almost 60% GDP (assuming nominal GDP growth remains at a crawl). For this reason, he feels that the yen remains a sell; the Nikkei remains a buy but as for the economy, about the best that can be said is that it will grow faster than the Euro Zone and slower than the US in the coming years.

He feels that given the size of Japan’s funding needs, its ageing population, its dwindling current account surplus and the encouragement the BOJ is giving to investors to move money overseas, it’s no wonder really, that people forecast a collapse in the JGB market every few weeks. However, he writes, “But rates are close to zero, inflation even lower, the BOJ is a buyer of bonds, pension funds and life insurers need duration, and savers need certainty. QE send yields lower in the UK and US and so far, despite a ludicrously volatile Friday session in Tokyo, QE is keeping JGB yields low too. I can’t see that changing soon.”