- Izumi Devalier, economist at HSBC
The latest minutes from the BoJ showed that policymakers are determined to keep the current pace of the monetary policy for the foreseeable future, meaning the stimulus programme that was launched in April 2013 is far from its conclusion. The Japanese central bank has been injecting $60-80 billion a month into the domestic financial system via purchases of the government bonds and risk assets.
While Japan's inflation is on the rise and there are signs of stronger activity in all sectors of the economy, the impact of the unprecedented stimulus programme is increasingly felt around Asian economies, especially taking into account tapering by the Fed. The U.S. central bank has been steadily scaling back its monthly purchases so far this year and this has evoked concerns of a sudden drought of liquidity in Asia, where stronger availability of dollar encouraged portfolio flow from global investors. Therefore the role of BoJ' actions is increasing, as QE provides additional buffer against the next round of the tightening. Recently Japanese commercial bank lending to Asian economies rocketed to an all-time high of $540 billion, increasing from $364 billion at the end of 2012, as banks look for better returns.
© Dukascopy Bank SA