Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
It is all getting a bit “jump over the shark” at this point. Overnight the Bank of Japan announced additional QE as countries and regions are now engaging in a form of currency war. Each time a country/region QE’s their currency takes a hit, so other competing countries/regions must counteract that by also trying to weaken their own currency as all the world wants to export their way out of recessions or slowdowns. Of course this is impossible to do as someone needs to import. So this appears like nothing more than a weak attempt to try to weaken the yen to some degree but no one other than the ECB could in theory reach the magnitude of QE as the U.S., so it seems doubtful to have much effect. But QEn Global is in effect.
Via CNBC Asia:
- Under pressure to ease monetary policy in the face of a strong yen, Japan’s central bank said Wednesday it would expand its asset-buying program, which resulted in the currency falling to its lowest level against the U.S. dollar in a month. Analysts warned, however, that this could just be a temporary drop.
- Given the aggressive easing from the U.S.Federal Reserve and the European Central Bank over the past two weeks, the Bank of Japan’s latest effort to weaken the yen may prove to be futile, say experts. “The BOJ action is an insufficient step in the right direction. We’re talking about unlimited easing by the ECB, the Fed and then you have in Japan a limited approach,” Hans Redeker, head of global foreign-exchange strategy at Morgan Stanley, told CNBC.
- The BOJ boosted its asset-buying and loan program by a more-than-expected 10 trillion yen ($126 billion) to 80 trillion. It also extended the deadline for asset purchases by six months to the end of 2013.
- Economists argued, however, that this will not be enough given the Fed’s decision to engage in open-ended quantitative easing, and the ECB’s pledge to make unlimited purchases of euro zone government bonds in the secondary market. Junko Nishioka, chief Japan economist at RBS Securities Japan, agrees that it’s getting harder for the BOJ to fight a surging yen.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
