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Bank of Japan (BOJ) has sought to monetary easing through asset purchase (Govt. Bonds, ETFs,REITs) since 2012 and has increased the pace of purchase to ¥ 80 trillion per annum in last October.
BOJ will announce latest monetary policy decisions tomorrow. Usually it is being released during Asian hours.
Many market participants expects BOJ to ease further policy in April's meeting as economy and inflation continue to pose weakness. However further easing will not be easy to come by.
Liquidity -
- Current pace of purchase has already reduced the liquidity in the world's second largest bond market.
- Bank of Japan's purchase is already crowding out the market. In some series BOJ has gobbled 70-80% of the issuance.
- At current rate of purchase, by 2016 BOJ will hold 40% of Japanese debt. Move is going to be heavily criticized as monetary policy financing.
Division among policymakers -
- BOJ board remains heavily divided. Last action came with 5 member voting in favor while 4 opposed further purchase increase in October 2014.
- BOJ policymakers Mr. Kiuchi has voted in favor of reducing purchase in March meeting and according to Mr. Ishida purchase pace stands at max.
- Prime Minister Abe's chief advisor Mr. Honda warned BOJ against further pace increase as it might lead to unnecessary heating of economy at latter half of the year.
However weaker Yen prior to the meeting raise concern as additional easing will open another floodgate for yen weakness.
Yen is down -0.60% against dollar, -0.63% against pound, -0.22% against franc, -1.36% against Aussie, -0.46% against Kiwi, -0.43% against Loonie however flat against Euro so far today.
