Japan’s monetary base: BoJ full steam ahead – Westpac

Sean Callow, Research Analyst at Westpac, suggests that since 31 Oct 2014 the Bank of Japan QE program has been running at an JPY80 trillion annual increase in the monetary base which equates to $59bn (using USD/JPY 113) per month, a very rapid pace by any standard but its new focus on keeping the 10 year JGB yield around 0% means this pace is likely to vary – this line may not be so steep in 2017.

Key Quotes

“The rise in oil prices starting in early 2016, backed by yen depreciation, has helped Japan’s total CPI bounce from below zero to 0.4% y/y in Jan 2017. But CPI ex-fresh food and energy was just 0.2% y/y in Jan, down from 0.9% a year earlier and barely above lows since 2013.”

“Japanese policymakers remain frustrated by the weakness in wages growth, still waiting for a “virtuous cycle” of rising wages, inflation and spending.”

“BoJ governor Kuroda is starting to be asked whether inflation will hit the 2% target before his 5 year term ends on 8 April 2018. It is hard to be optimistic.”