Bank of Japan Creates a Little Excitement

Finally after more than 25 days of being stuck in the 2.80s the 10 year treasury note finally jumped today to close at 2.96%.  It only took unconfirmed reports that the BOJ (Bank of Japan) would consider toning down the Quantitative Easing program in that country.

Of course the QE program in Japan makes the Fed QE program look like child’s play.  The BOJ owns near 100% of their GDP in government and corporate bonds, ETFs, REITS and other sorts of assets.  If the FED balance sheet looked like the BOJ balance sheet it would have near $16 trillion in assets instead of $4.3 trillion.

Of course comparing the central banks of Japan with the U.S. is an exercise in silliness.  Their 10 year bond hit a high of .09% today—and in the past the BOJ would begin asset purchases if the 10 year hit .10 or .11%.  This is really silliness since there is little inflation in Japan and the ability of the BOJ to stimulate economic growth is near non existent in a county where the median age is near 47—savers not spenders.

Regardless of the minimal level of interest rates in Japan any increase in Japanese interest rates is likely to drive U.S. rates higher as the Japanese investor is more likely to desire to buy Japanese bonds instead of U.S. bonds.

Since this entire ‘story’ was from ‘unnamed sources’ we will watch in the days ahead to see if any official news comes from the BOJ.

3 thoughts on “Bank of Japan Creates a Little Excitement”

  1. I am glad you found this information because I couldn’t find what was causing treasury spreads to be so volatile. I am interested to see how this plays out in the days/weeks ahead.

  2. tradingeconomics.com/japan/interest-rate

    This site has some interesting info on the Jap rates and info from the BOJ… Might interest those trying to figure out the next move…

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