Bank of Japan Adds Asset Purchases, Cuts Credit Facility

I have repeatedly been saying that expectations over central bank policies or their anticipated actions has recently driven the price movements of global stock markets.

Today, the Bank of Japan (BoJ) decided to take supposedly a ‘neutral’ stance: they will buy more assets but cut credit facilities by the same amount

From the Bloomberg,

The Bank of Japan refrained from adding monetary stimulus, bolstering its asset-purchase fund while cutting a credit-loan facility by the same amount.

The bank expanded its asset-purchase program to 45 trillion yen ($564 billion) from 40 trillion yen, according to a policy statement released in Tokyo today. Seven of 17 economists surveyed by Bloomberg News predicted monetary easing. The loan facility was cut to 25 trillion yen from 30 trillion yen.

Stocks fell after the decision, which came after South Korea’s central bank unexpectedly lowered borrowing costs amid signs of slower global growth. Japanese Finance Minister Jun Azumi this morning called for more support from the central bank for growth and inflation to meet a 1 percent price goal…

The BOJ pledged to increase its purchases of short-term public debt, according to today’s statement. Previous enhancements to the program had been mostly for long-term government bonds.

Japan’s central bank kept its benchmark interest rates between zero and 0.1 percent and monthly bond purchases at 1.8 trillion yen, the bank said in the statement today.

Here is what I earlier said,

if central bankers FAIL to deliver in accordance to market’s expectations, then we will likely see another huge bout of downside volatility in global equity markets

The Nikkei fell 1.48% today.

This proves that Japan’s stock markets has been thriving on the inflation steroids and that looking for scapegoats such as insider trading has only served as political diversion.

This also confirms my suspicions about the BoJ’s veiled support of the banking and financial system, through more asset purchases, whom are the largest owners of the Japanese Government Bonds (JGB) and of the growing risk of Japan’s gargantuan debt quagmire.

For as long as central bankers stay on sidelines or resort to measures that fall short of market’s expectations we should expect reality to sink in. This should extrapolate to more selling pressures on the global equity markets.

Be careful out there.