Bank of Japan decided to keep an open ended Asset Purchase program, with the explicit target of 2% inflation, joining the likes of Federal Reserve in an ultra-easing monetary policy, and officially makes BOJ the card-carrying member of the Infinity (and beyond?) QE Club!
Here are the highlights of this BOJ meeting:
(JP) BANK OF JAPAN (BOJ) LEAVES TARGET RATE RANGE UNCHANGED BETWEEN 0.0-0.1%, AS EXPECTED; INTRODUCES OPEN-ENDED ASSET PURCHASES; SETS 2% INFLATION TARGET IN JOINT STATEMENT
Open Ended Asset Purchase Method:
So without really getting into the rest of the report, you can clearly see that this is positive news for yen-short traders. Of course, the 7-2 vote may spook some people, but ultimately BOJ is “playing ball” with the government and will continue with the open-ended program until inflation (CPI) rises to 2%. This means that for the past three years traders have been waiting for the infamous “carry” trade to return, and this may very well be the beginning of a long lasting carry-trade move that may continue through to 2014.
The idea now is not to overleverage and start building small positions when market dips, keep adding positions, and don’t be greedy. The key is stay in the trade for as long as you can, and if you are still in the trade by January 2014, you’ll definitely be happy with the results, as with global economic improvements, risk appetite sentiment, and continued Bank of Japan easing, I wouldn’t be surprised to see USDJPY above the 100 ~ 110 level.
Bank Of Japan (BOJ) Joins the QE Infinity Club!
January 22, 2013 by 2 Comments