From the action-packed BoJ, here's the simplest chart in the world that shows two year projections for the Monetary Base and the Government Bonds. It also shows the projected expansion in the central bank balance sheet which is roughly 40% and 30% for '13 and '14!!:
(TRILLIONS OF YEN)
Some more quick highlights (or what you already know!):
- In line with the projection of the expansion in the monetary base (what you see above in blue), the BoJ will achieve the price stability target of 2% in a yoy % change in the CPI as quickly as possible but realistically within two years (note: there was a motion to remove this '2 year horizon' claim but it was shot down 8-1 in a vote).To do this, the monetary base will be doubled (visible above). This will also apply to the JGBs and the ETFs (while also pushing further on the average remaining maturity of its JGB purchases).
- Conceivably, its target for money market operations would be through the monetary base (from the uncollateralized overnight call rate).
- A unanimous vote to increase JGB purchases as well as their maturity extensions to spur a further reduction in rates across the curve. Additionally, even maturities including 40 year bonds would come under this purchase-net while the average remaining maturity of its purchases gets extended from slightly less than 3 years to about 7 years.
- To reduce the risk premium in asset prices, REITs and ETFs would be purchased at the proposed pace, while the Asset Purchase Program naturally bids farewell.
- Here's what the statement has to say about the 'banknote principle' - that all these government bond purchases are for the purpose of monetary policy implementation and not to finance its fiscal deficits. Then there's the usual brouhaha on "establishing a sustainable fiscal structure...ensuring the credibility of fiscal management.."
- An extension of funds-supplying operations to support financial institutions in disaster areas. This is why the Loan Support Program has an expected annual percentage expansion of almost 300% followed by 40% over the next two years.
- On the economy, you see your conventional terms of "signs of picking up" and "a moderate recovery path". While the change in CPI still hovers in negative territory, there might be indicators suggesting a change in inflationary expectations which I believe still remain relatively anchored.
The last statement on this, which reads "conditions in financial markets have turned favorable due to the abatement of global investors' risk aversion and expectations for domestic policies" could be another way of saying, "The Nikkei has been booming with all this talk" but we'll leave that for another time...
(TRILLIONS OF YEN)
Some more quick highlights (or what you already know!):
- In line with the projection of the expansion in the monetary base (what you see above in blue), the BoJ will achieve the price stability target of 2% in a yoy % change in the CPI as quickly as possible but realistically within two years (note: there was a motion to remove this '2 year horizon' claim but it was shot down 8-1 in a vote).To do this, the monetary base will be doubled (visible above). This will also apply to the JGBs and the ETFs (while also pushing further on the average remaining maturity of its JGB purchases).
- Conceivably, its target for money market operations would be through the monetary base (from the uncollateralized overnight call rate).
- A unanimous vote to increase JGB purchases as well as their maturity extensions to spur a further reduction in rates across the curve. Additionally, even maturities including 40 year bonds would come under this purchase-net while the average remaining maturity of its purchases gets extended from slightly less than 3 years to about 7 years.
- To reduce the risk premium in asset prices, REITs and ETFs would be purchased at the proposed pace, while the Asset Purchase Program naturally bids farewell.
- Here's what the statement has to say about the 'banknote principle' - that all these government bond purchases are for the purpose of monetary policy implementation and not to finance its fiscal deficits. Then there's the usual brouhaha on "establishing a sustainable fiscal structure...ensuring the credibility of fiscal management.."
- An extension of funds-supplying operations to support financial institutions in disaster areas. This is why the Loan Support Program has an expected annual percentage expansion of almost 300% followed by 40% over the next two years.
- On the economy, you see your conventional terms of "signs of picking up" and "a moderate recovery path". While the change in CPI still hovers in negative territory, there might be indicators suggesting a change in inflationary expectations which I believe still remain relatively anchored.
The last statement on this, which reads "conditions in financial markets have turned favorable due to the abatement of global investors' risk aversion and expectations for domestic policies" could be another way of saying, "The Nikkei has been booming with all this talk" but we'll leave that for another time...
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