Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
The Death of the US Real Estate Dream - 22nd Jul 18
China is Now Officially at War With the US and Japan - 22nd Jul 18
You Buy the Fear in Gold - 22nd Jul 18
Trumponomics Stock Market 2018 - The Manchurian President (1/2) - 21st Jul 18
The Death of Japan's Real Estate Dream - 21st Jul 18
SMIGGLE Amazing Mega Shopping Haul, Pencil Cases, Smigglets and Giant Back Packs! - 21st Jul 18
Cayton Bay Beach Caravan Park Holiday - What's it Like? - 21st Jul 18
Gold Stocks Investment Wanes - 20th Jul 18
Diversifying Your Stock Investing Strategies is Smart Investing - 20th Jul 18
Custom Global Stock Market Indexes May Be Sounding Alarms - 20th Jul 18
S&P 500 Just 2% Below Record High, But There's More Stock Market Uncertainty - 19th Jul 18
Stock Market Technical Picture - 19th Jul 18
Gold Market Signal vs. Noise - 19th Jul 18
Don’t Get Too Bullish on Gold - 19th Jul 18
Bitcoin Price Rallies to Upper Channel – What Next? - 19th Jul 18
Trump Manchurian President Embarrasses Putin By Farcically Blowing his Russian Agent Cover - 19th Jul 18
The Fonzie–Ponzi Theory of Government Debt: An Update - 19th Jul 18
Will the Fed’s Interest Rate Tightening Trigger Another Financial Crisis? - 18th Jul 18
Stock Market Investor “Buy the Dip” Mentality is Still Strong, Which is Bullish for Stocks - 18th Jul 18
Stock Market Longer-Term Charts Show Incredible Potential - 18th Jul 18
A Better Yield Curve for Predicting the Stock Market is Bullish - 18th Jul 18
U.S. Stock Market Cycles Update - 18th Jul 18
Cayton Bay Hoseasons Caravan Park Holiday Summer 2018 Review - 18th Jul 18
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

USD/JPY: Bank of Japan’s Yield Curve Control Could Weigh

Currencies / Japanese Yen Jan 09, 2018 - 12:45 PM GMT

By: Submissions

Currencies

Two years ago, the Bank of Japan (BoJ) took financial engineering into a whole new level by introducing the concept of “yield curve control” in an attempt to rescue the country’s declining economy. Basically, this policy aims to keep the central bank’s 10-year government bond yield at zero. In order to do this, BoJ has opted to buy enormous amounts of Japanese government bonds at 0.110 percent.


While it is believed that central banks cannot control interest rates, in the long run, BoJ thinks that its quantitative easing can control and make the yield curve rise. In order to do that, BoJ plans to increase the difference between long-term bonds and short-term bonds (which are negative in Japan).

Negative perceptions about BoJ’s yield curve control

BoJ’s effort to generate inflation is deemed to be an aggressive one. In fact, it is even considered to be more assertive than the U.S. Federal Reserve which has expanded its balance sheet to more than $4.5 trillion but still has failed in inflation generation. However, with the gradual stabilization of the yields from the Japanese government bonds, BoJ policymakers prompted investors that BoJ won’t make the same mistake that the latter has committed.

  • Despite the assurance given by the officials of BoJ, its yield curve control policy is still subject to many drawbacks. One of the greatest challenges carried along with the yield curve control is that it will most likely increase the profitability for banks, which will depend on the wider spread in rates to take advantage of the profit difference among them.
  • In general, more banking activities cause higher economic activities and higher inflation. Financial analysts, however, think that profits in Japan may only be gradual. A number of financial experts, ever since this concept was introduced, have always believed that BoJ could not make it.

What’s in store for BoJ in 2018?
As alluded to earlier, many experts think that while BoJ may still continue to stay for more years, it will no longer lead the war against deflation, unless economic growth expectations rise or is driven by a pick-up in Japanese inflation.

  • According to them, it would be hard for BoJ to raise the Japanese government bond because, in the first place, the inflation is far from the 2 percent target. Market forces in areas like cfd trading will be harder to beat because the global tide of central banking is working toward normalization.
  • Furthermore, experts believe that even of the BoJ boost the purchase of bonds, it may still encounter diminishing returns.
  • While BoJ officials still hope that the effects of the rise of global yield on Japan would be minimal, the current market situation shows that there is no guarantee that the effects would be controlled.
  • To make matters worse, the Bank of Canada, Bank of England, and many other central banks in the world are working together to pull the plug on extraordinary monetary support utilized during the financial crisis.

By  New Forex Trends

Copyright © 2018 New Forex Trends - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules