BOJ –Japan’s central bank Governor Haruhiko Kuroda made a drastic shift in monetary policy & began his campaign to end 15 years of deflation in Japan with a strengthened stimulus program. BoJ, in an aggressive move will now buy 7 trillion yen ($73 billion) of bonds a month to display its seriousness on the issue. The world’s most aggressive & intense burst of monetary stimulus, promises to inject about $1.4 trillion into the economy in less than two years, a radical gamble which will intensify the ongoing Global Currency Wars.
The Bank of Japan is already quite close to doing open-ended Quantitative Easing, anyway, and they are likely to announce that later in the month. BoJ has launched a new phase of monetary easing both in terms of quantity and quality” to push prices higher and achieve a 2% Inflation target at the “earliest possible time.” In a move similar to the US Federal Reserve & Bernanke, Haruhiko Kuroda, Japan’s central bank governor, said that the bank would continue to pump money into the economy until the inflation target was “sustainably foreseen”. Analysts said the central bank’s move was bold. “Mr Kuroda has come out with guns blazing in his inaugural meeting as Bank of Japan (BoJ) Governor, surpassing our own expectations and those of the market with aggressive policy measures to put an end to deflation in the Japanese economy,” said Brian Jackson, global foreign exchange strategist at Coutts.
The Japanese Yen continues to decline further & touched a low of 96 to the Dollar – its lowest since Mar 21. The BOJ is increasing purchases of exchange-traded funds (ETFs) and real-estate investment trusts (REITs) – a sign of monetary imprudence if ever there was one. The Bank of Japan satisfied stock markets with a host of new monetary easing that sent the yen tumbling and helped stocks recover from losses, while substantially contributing firepower in the Global Currency Wars. The fact that it is risks an outbreak of significant inflation and possibly a currency crisis is being ignored by market participants for now.Tokyo’s stock market closed up 2.20% today at 12,634.54 after the Bank unveiled the measures, while the yen fell sharply against the dollar to 95.68 yen, from Wednesday’s close of 93.04 yen.
Another Currency Wars participant, Britain’s debt mountain has topped £1.387 trillion, and is now the equivalent of 90% of the entire economy. The grim milestone was passed at the end of 2012, new figures from the Office for National Statistics revealed yesterday. The shocking figure will be used later this month to compare Britain’s finances to the rest of Europe. The dismal state of government borrowing has already forced Chancellor George Osborne to abandon his target to see net debt, a different measure, falling as a percentage of the economy by 2015-16. But he has refused to budge on his austerity program. Gross debt rose from £238 billion in 1992 to £402 billion 10 years later. In the last five years gross debt has soared from £577 billion in 2006 to £1.387 trillion in 2012.It means gross debt is equivalent to 90% of the entire UK Economy, well above the 60% threshold set by the European Union. The UK gross debt level is up from 85.5% of GDP at the end of 2011 and just 43.3% in 2006.
The BOJ has now made a much firmer commitment to achieving its 2% inflation goal, and has demonstrated that it will do anything short of foreign-bond buying to achieve this goal. Global money supply is sure to continue multifold expansion in the year ahead & this will ensure full blown Currency Wars. Gold and Silver Prices should gain on the monetary debasement, an outcome of the intense Currency Wars, sooner than later now. Gold Prices dropped to a 10-month low on Thursday as investors cashed in the precious metal to cover steep losses in equities after disappointing US economic data. Comex Gold fell as far as $1,540 an ounce, its lowest since May 2012. Gold Prices had slumped earlier as investors were seeking higher returns in equities as the global economic recovery cuts demand for safe haven assets. There have been record sales of government Gold Certificates in recent weeks, there has been little increase in sales of physical Gold Coins and Gold Bars. There is also the unfortunate phenomenon of many middle class people having to sell their Gold Holdings as it is liquid and they are under financial pressure and need the cash in order to pay down debt or just to use in day to day spending. Unfortunately, traders continue to buy strength and sell weakness – the opposite of course of what they should do.
Just hope traders have not developed the tendency to now sell at every rise….
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