Tag: quantitative easing (QE)

Bank of Japan To Release More Stimulus?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Yep, it's the same old story; once again, Japan is just muddling through. Private consumption is weak and inflation is practically non-existent. And inflation could get worse with the latest plunge in oil prices. And with Japan barely slogging through, investors' call for the BoJ to amp its efforts are on the rise.

So what's the problem? In the eyes of the BoJ, the situation isn't really bad enough to require further intervention.

What The BoJ Sees

So why wouldn't the BoJ want to add any more gunpowder to an already aggressive stimulus plan? The answer comes in two parts.

The first part was covered extensively in my last article and thus needs little elaboration. That is the BoJ wants the Abe government to shoulder some of the burden. It needs to fulfill its own side of the bargain and push forward much needed financial reforms.

And the second part? The BoJ wants to hold some gunpowder in its arsenal... just in case things get worse. With the Chinese stock market meltdown radiating across the world, the BoJ wants to make sure it has enough "weapons" to unleash. But so far, in the eyes of the BoJ, it's not yet bad enough to risk the economy.

Graph of Japanese Annual Inflation
Chart courtesy of The Statistic Bureau of Japan

Let's take a quick look at the latest key data. November's inflation figure (annualized), albeit rather low, still wasn't the textbook definition of deflationary pressures. From a total of 10 various segments, from food to energy to housing, only transportation and energy fell on an annual basis while Housing prices were unchanged at 0%. Despite the dismal numbers, for deflation to be a risk, prices of most items need to fall. And as the chart below shows, that has yet to happen. Continue reading "Bank of Japan To Release More Stimulus?" →

The Head Of The ECB Speaks - What Did He Say?

Posted on by The INO.com Team

After a wild day in the markets yesterday, Mario Draghi, president of the European Central Bank, was at center stage this morning. What he said was almost incomprehensible to most people, including me. The clear takeaway was that European interest rates will not be going higher anytime soon. He was also asked what instruments the ECB have left to fight the current impasse in the markets. His answer was classic mumbo-jumbo Central Bank talk and did not address the question at hand.

It seems to this observer that the ECB and the Fed are literally out of ammo and have no clue what to do next. Fed chairwoman Janet Yellen's decision to raise interest rates here in the United States was, in my opinion, too late to have the desired effect. Should the markets head south as it looks like they may be doing, does the Federal Reserve have a backup plan or do they move rates back down again to stimulate the economy with another QE? Continue reading "The Head Of The ECB Speaks - What Did He Say?" →

Will 2016 Bring A Turnaround In FX?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


The year 2015, no doubt, has been a year to remember. Markets saw the first Fed rate hike in years which pushed the Dollar ever higher. In the Eurozone, the ECB's QE pushed the Euro to lows it hasn't seen in years. And in China, the Yuan, too, is being pushed to record lows as China's economy gets squeezed.

Now, with 2016 practically knocking at the door, the question is will 2016 be the year of a turnaround? Or will the themes of 2015 continue to dominate? Here are some major areas to focus on which can help us figure it all out. Continue reading "Will 2016 Bring A Turnaround In FX?" →

Why The Euro Is Rising And Why It Can't Last

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


For the investors who are watching the Euro, its latest behavior might appear bewildering. After all, the ECB, slightly undershooting expectations, still increased its target asset purchases to roughly €1.5tn. At the same time, the ECB cut the deposit rate to -0.3%. And let's not forget the goings on over on the other side of the Atlantic. There, the Federal Reserve is gearing towards its first rate hike in almost a decade. What, then, could possibly incentivize investors to buy Euros? And can it last?

Draghi's Words Hit a Nerve

When investors expect more central bank easing, they also expect the obligatory rhetoric. But what they hate is when the rhetoric is of a very specific sort. In this case, it is when a central banker stresses the limitations of monetary stimulus. Yet, in practically the same breath, they drive home the need for more government input. And essentially, that is exactly what Mario Draghi said.

Now, when the Fed unleashed similar rhetoric, it was seen as a signal that its ammunition might be running out. Earlier this year, the BoJ had made a similar statement in an attempt to lower expectations of more stimulus. Continue reading "Why The Euro Is Rising And Why It Can't Last" →

Japanese Bonds: Yield of Dreams?

Posted on by The INO.com Team

By Elliott Wave International

Saber-tooth tiger. Woolly mammoth. Japanese government issued bonds?

Well it's happened. After years of enduring an unrelenting bear market (marked by plunging yields and rising prices) -- the long-battered Japanese government bond has made it on to the endangered financial species list.

Asks one October 26 Reuters: "JGB's on the edge of extinction?"

The prognosis isn't looking good. In late October, the yield on the 10-year JGB plunged below .300% for the first time in six months. While everyone from Japanese retailers to foreign investors continue to abandon the JGB for other higher-yielding assets.

Which begs the question, why is Japan's bond market facing annihilation? Continue reading "Japanese Bonds: Yield of Dreams?" →