Japan, buried head printing money!

According to the current exchange rate, on the scale of “printing money”, there are four giants in the world.

The Federal Reserve

The European Central Bank

The People’s Bank of China

The Bank of Japan

In terms of the size of the central bank balance sheet, any of these four central banks, direct money printing scale of more than 5 trillion U.S. dollars, all the other economies combined, according to the exchange rate after converting the scale of money printing, but also than these four – even the originator of the central bank, the Bank of England, the total amount of money printing after converting the dollar, but also only the above The total amount of money printed by the Bank of England is only about 1/4 of the four giants.

Note that this is the size of central bank balance sheets, not the size of broad money, which means that this is real “central bank money printing”.

So, to know how much money there is in the world today, it is enough to look at these four central banks.

Obviously, 20 years ago, the total size of the world’s four most important central banks printing money, less than 4 trillion dollars, but today, the total size of these four central banks printing money, has nearly 30 trillion dollars, of which.

ECB $8.5 trillion

8.5 trillion dollars by the Federal Reserve.

US$6.1 trillion by the Bank of China

The Bank of Japan’s $5.6 trillion

The two periods when the four major central banks printed the most money were 2008-2013 and 2020-2021.

However, if you ask, which global central banker has printed the most money since 2023?

It’s still up to the Bank of Japan.

In the month just past 2023, the Bank of Japan’s total assets came in at 734 trillion yen from 704 trillion yen, a net printing of 30 trillion yen a month ($230 billion at current exchange rates), a surge of more than 4%, the highest growth rate since 2017, and even higher than the growth rate in 2020 when global central banks started their money printing chorus.

Why is this case?

Because of the Bank of Japan’s Yield Curve Control (YCC) policy on government bonds

For more on YCC, see: “YCC for the first time”

Since last October, with the widening of the Japanese and US bond yields and the expectation of a continued rise in US Treasury yields, coupled with the expected depreciation of the Japanese yen, there has been a constant dumping of Japanese government bonds in the market and their exchange for US dollar treasury bonds, and based on the YCC monetary policy, the BOJ has had to keep buying the bonds sold in the market as a way to suppress the rise in Japanese bond yields.

Mind you, in the meantime, the Fed and the ECB are still shrinking their asset size!

Currently, Japan’s 734 trillion Yuan central bank balance sheet size, equivalent to 133% of the size of Japan’s GDP in 2022, the ratio to calculate Japan is the highest level in the world.

If in accordance with the past month the Bank of Japan balance sheet size growth rate, it will not be long, most of Japan’s national debt, may be purchased by the Bank of Japan, the entire Japanese government bond market will lose its significance.

The total amount of government bonds held by the Bank of Japan rose sharply from December, which was not the most violent stage of the yen depreciation, but the time when the Bank of Japan expanded the YCC range, so in this sense, it is the same as saying that the Bank of Japan expanded the YCC range, which seems to make the yen depreciation was curbed and turned into appreciation, but on the other hand, it has raised doubts in the market about the YCC policy determination.

Investors in the Japanese government bond market seem to be betting that the BOJ will continue to expand the YCC range or simply abandon the YCC policy, which will lead to higher yields and lower prices of Japanese government bonds, so investors are selling Japanese government bonds sharply, while the BOJ has to continue to buy because of the YCC policy, resulting in the scale of government bonds held by the BOJ continues to climb.

Another explanation may be a little more interesting.

It is in view of November, the Fed and the ECB interest rate hike policy “back slope”, the price of risk assets “attractive”, the yen is expected to appreciate, so Japanese government bond investors have sold government bonds to liquidate the yen, and then exchanged into foreign exchange to buy risk assets, thus This led to a sharp increase in the amount of government bonds held by the Bank of Japan.

It is in this time of the surge in Japanese government bond holdings, international prices of various risk assets (including U.S. stocks, European stock markets and gold markets, etc.) rose sharply, so that is to say, in recent times, it is clear that the Fed and the ECB’s policy statements are not any “significant relaxation” is expected, but asset prices are all the way The rise of……

It’s because the Bank of Japan keeps printing money to buy!

The Bank of Japan has printed $230 billion in the past month; you say the price of risky assets cannot rise?

Since the implementation of zero interest rates in 1999, because the government debt/GDP ratio is ridiculously high, so the Bank of Japan has been “courageous to explore” a variety of “unconventional monetary policy”.

Because of Japan’s debt problem, it is obviously impossible to let the market yield of Japanese government bonds “float freely”, and in the face of the prospect of the Japanese government bond market “bought by the central bank” – -This is obviously impossible.

For the former reason, I personally tend to believe that the BOJ will firmly reaffirm its YCC policy to dispel market doubts about the policy and thus reduce the market sell-off of JGBs.

The latter reason is that the “arbitrage” process will probably only stop when international risk assets rise to “less attractive” prices.

 

 

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