-Daisuke Uno, the Tokyo-based chief strategist at Sumitomo Mitsui Banking Corp.
Abenomics are boosting consumer prices and growth in the world's third largest economy. That is not a question, as economy is approaching its 2% inflation target, while fundamentals are stronger-than-expected even taking into consideration the boost provided by the tax hike. Nevertheless, there is a huge disadvantage as well.
The unprecedented stimulus programme launched in April 2013, has released a creeping paralysis that is freezing government bond trading, bounding the Yen to the tightest range on record and limiting stock-marking activity. The average volatility on Japanese government bonds plunged to a year-and-a-half low of 0.913% last Friday, while a lack of activity in the market delayed trading at least four days over the last week. At the same time, the Japanese Yen has been trading in a range of 4.68 per U.S. Dollar since the beginning of this year, the tightest range since the world's third largest economy ended its currency control more than four decades ago. Furthermore, the average trading on the Topix benchmark index stood at its lowest level in more than a year. Actions done by the Bank of Japan have made it the largest player on the bond market, while last week's announcement to reduce or maintain the monetary policy, pushed the yields on government bonds to a record-low, while the Topix soared to its highest since 2008.
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