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Australia

Australian deputy governor Mr Guy Debelle states that the A$ is not high enough to justify intervention. However, he added that the RBA could reduce interest rates if necessary. With even the RBA talking about currencies, do you really think that the G7/G20 statement about countries not competing to reduce the value of their currency is for real – Yep, I thought not;

 

Japan

Japanese policy is to increase inflation to 2.0%, though no time period has been provided. However, long bonds (30 year) yields are lower – 1.88%, with the 10 year at 0.69%. Yes, you could argue that the lower yield reflects the impending BoJ policy of buying long dated JGB’s, but it could (in my opinion does) also reflect the fact that the market also does not believe that the BoJ can increase inflation to 2.0% any time soon. However, the decline in yields also suggests that the amount of bonds to be purchased by the BoJ will be enormous. As a result, with the 3 major Central banks, the FED, the ECB (in spite of denying it) and the BoJ, in effect, printing money, markets should react positively in due course given the flood of liquidity and once the uncertainty in the EZ subsides. In addition, the Yen carry trade will be back, with a vengeance.

It looks as if the main opposition party, the DPJ, will be supporting the appointment of Mr Kuroda, if as expected, he is chosen by PM, Mr Abe to head up the BoJ. Mr Abe needs the support of the Upper House, which he does not control, to ensure that his candidate. The candidate will be announced this Thursday;

* SNIP *

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Category: Think Tank

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