Japan’s monetary base: BoJ full steam ahead - Westpac

Sean Callow, Research Analyst at Westpac, suggests that the Since 31 Oct 2014 the Bank of Japan QE program has been running at an JPY80 trillion annual increase in the monetary base.

Key Quotes

“This equates to $65bn (using USD/JPY 103) per month, a very rapid pace by any standard.

Japan’s CPI ex-fresh food slipped to -0.5% y/y in July, while CPI ex-fresh food and energy softened to 0.3% y/y, a low since Oct 2013. Crude oil prices have risen sharply from the Jan 2016 lows but of course the stronger yen has offset some of this. Overall CPI was -0.4% y/y in July, while the value of imports tumbled -24.7% y/y in July, but only -4% y/y in volume terms.

Hence the surge in the yen is producing a strong deflationary impulse at a time when policymakers remain frustrated by the weakness in wages growth.

The BoJ projects a return to CPI of 2% y/y “during fiscal 2017” (Apr 2017 – Mar 2018).”