Kyle Bass: BOJ will have to make buying bonds bigger

The distinguished fund manager Kyle Bass in the following audio interview calculates that the  BoJ’s actions will not be enough to a keep a lid on interest rates. (hat tip Zero Hedge)

He says that the BoJ has programmed ¥ 60 trillion over 2 years which should cover about ¥ 50 fiscal deficit (about 10% of GDP). This leaves $10 trillion room for bond purchases in order to stabilize the bond markets or interest rates. However given the quadrillion JGBs out there, and even if only 5% or $50 trillion gets sold, Mr. Bass says “it doesn’t look to me that the plan is big enough”. And in the attempt to stabilize the market, “the BOJ has to be in the marketplace every single day”

Mr. Bass believes that the BoJ actions may yield short term gains “Abenomics will generate nominal growth in the front end”. He calls Japan stock market buyers as “macro tourists” (that’s yield chasing participants in my terminology) and warns that the public that the “weak yen will not equal higher stocks” where some stocks can be expected to benefit while most will suffer.

So the BoJ will have to bump up the quantity of buying or expect the market's volatility to continue.