''But one thing is for sure, a country that continues to fiscally overspend and have its reserve bank purchase the debt to finance the spending will ultimately destroy its currency.''
Jack Colreavy, CFA, discusses the current state of Japan's economy and the reason for its stagnation.
One of the most important Bank of Japan interest rate meetings occurred last week and the market was pricing in them changing TAC and finally ending their loose monetary policy. Unfortunately, they defied market expectations and they maintain their negative interest rates and are maintaining yield curve control of 0 percent on the Japanese 10 year.
Now, the market likes to test this resolve by selling Japanese government bonds into the market, which forces up the yield. This forces the Bank of Japan to purchase bonds to bring the yields back down. And as a result, in the 10 days in January, 1. 4 trillion yen was spent by the Bank of Japan in order to maintain that yield.
And that's ballooned their balance sheet to 565 trillion in Japanese government bonds. They own over 50 percent of all Japanese bonds outstanding, which has all sorts of problems with how the market flows and fluctuates. This is leading to a lot of market participants leaving the Japanese government bond market, which is having disastrous effects on the yen.
The yen has depreciated significantly against all currencies, and there looks to be no sign of recovery unless the Bank of Japan changes tack and starts to ease off this loose monetary policy that they've held in place for almost 30 years. To learn more, please subscribe to As Barclay Sees It by clicking the link in the description.
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Barclay Pearce Capital Management Pty Ltd is the holder of an Australian Financial Services Licence (Number: 503261). The information provided on this website is general in nature only and does not constitute personal advice. The information has been prepared without taking into account you or your company’s objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product. The material contained on the website is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.
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Barclay Pearce Capital acknowledges the Traditional Owners of the land where we work and live, the Gadigal of the Eora Nation and pays our respects to Elders past, present and to the children of today who are the Elders of the future. We celebrate the stories, culture and traditions of Aboriginal and Torres Strait Islander Elders of all communities who also work and live on this land.
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Tel: +61 2 8288 6900
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Barclay Pearce Capital Management Pty Ltd ACN 619 189 847 | AFSL: 503261
Barclay Pearce Capital Investment | ACN: 667 428 480 | CAR: 1303113
Barclay Pearce Capital Asset Management | ACN: 661 805 250 | CAR: 1302665
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Barclay Pearce Capital | ACN: 671 103 254
Barclay Pearce Capital Communications | ACN: 659 740 217
Barclay Pearce Capital Events | ACN: 661 642 726
BPC UK Ltd | CRN: 14822860
© 2024 Barclay Pearce Capital - BPC | All Rights Reserved
Disclaimer:
Barclay Pearce Capital Management Pty Ltd is the holder of an Australian Financial Services Licence (Number: 503261). The information provided on this website is general in nature only and does not constitute personal advice. The information has been prepared without taking into account you or your company’s objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product. The material contained on the website is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.
Barclay Pearce Capital acknowledges the Traditional Owners of the land where we work and live, the Gadigal of the Eora Nation and pays our respects to Elders past, present and to the children of today who are the Elders of the future. We celebrate the stories, culture and traditions of Aboriginal and Torres Strait Islander Elders of all communities who also work and live on this land.