BOJ’s QE Won’t Unleash Hot Money, Unlike Fed

Investors expecting a flood of Japanese liquidity into risky assets thnks to the country’s latest monetary stimulus may be disappointed, said experts, marking a contrast from the U.S. Federal Reserve’s three rounds of quantitative easing that unleashed a wave of speculative funds into financial markets.

Bank of Japan’s $1.4 trillion asset purchase program is significantly larger, as a percentage of gross domestic product (GDP), than that of the U.S. central bank, but there is a key difference – Japanese banks, insurers and pension funds that are all likely to be flooded with cash as a result of this easing are conservative in their investing habits and will likely use these funds to buy safe assets, analysts said.

The Bank of Japan (BOJ) is expected to purchase around 70 percent of government bonds issued each month, driving yields lower and crowding out private sector investors. Japanese banks, insurers and pension funds have around three quarters of their securities portfolios in domestic debt, according to Deutsche Bank.


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