[Please note, a few astute commentators - and indeed a few of our own commentators - believe QE2 is laying the groundwork for the next backdoor bailout, that is buying MBS and CMBS from the banks during the next leg of 'don't call it a recession' & 'housing recovery'.]
The latest Japanese QE (I have no idea which version they are on, as it's been going on for a decade) is $61B USD; a 'modest' sum (as we've become numb to large numbers) in a $5T economy. To put into perspective this would be equivalent to QE of $150B in US economy terms. We should get $150B in a month and a half of QE2. But it's not how much that is astounding, but "what".
- ....the Bank of Japan left interest rates untouched and offered new details of a $61 billion asset purchase program intended to spur lending to companies.
- The BOJ's governor, Gov. Masaaki Shirakawa announced a "comprehensive monetary easing policy" on Oct. 5 that consisted of the rate cut and a pledge to maintain the zero rate policy until prices start rising again. It also included the creation of a temporary 5 trillion yen ($61 billion) fund to purchase financial assets such as government securities, commercial paper and corporate bonds in an attempt to stimulate the economy by lowering longer-term interest rates and risk premiums.
- The Bank of Japan outlined details of the program Thursday. It will buy up to 3.5 trillion yen of Japanese government bonds and treasury discount bills. The rest will be used for commercial paper, corporate bonds, exchange-traded funds and Japan real estate investment trusts.
So there you go - rather than transferring money into the primary dealers and letting them do 'what they see fit' with the liquidity (wink wink) as in the U.S. - Japan is removing the middle man and going full Argentina. One should pause here and think how remarkable of a point we have reached.
- The central bank also moved up its next meeting from Nov. 15-16 to Nov. 4-5, a couple days after a Federal Reserve meeting.
- "The change of the policy meeting schedule clearly indicates the (central bank) may react promptly once the Fed's decision has a significant impact on the markets, especially on accelerating the yen's appreciation," said Junko Nishioka, chief economist at RBS Securities Japan, in a note to clients.