BOJ’s Asset Purchases has Flow On Effect

The Bank of Japan’s unprecedented asset purchase program has released a creeping paralysis that is freezing government bond trading, constricting the yen to the tightest range on record and braking stock-market activity.

Historical price volatility on Japanese bonds slid to a 2 1/2-year low of 0.913 percent on June 13 and a lack of activity delayed the start of trading for four days last week. The yen has been in a 4.68-yen range since Jan. 1, the tightest since Japan ended currency controls four decades ago. Average trading on the Topix index is near its lowest level in 1 1/2 years.

Asset purchases have not only made BOJ Governor Haruhiko Kuroda the biggest player in Japan’s $9.6 trillion bond market, they have also given him the most leverage over currency and equity markets in the world’s third-largest economy. Kuroda last week refrained from either expanding or reducing monetary easing that drove the yen to its biggest annual loss in more than three decades, pushed yields to a record low and boosted the Topix index to its highest since 2008.

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.