Every meeting in Tokyo pointed me to the impact of the Bank of Japan. It was only appropriate that a visit to the Bank of Japan was my last official visit in Tokyo. My great thanks to Shinji Isaki for taking time to increase my understanding of the Bank.
I have already talked extensively about the extraordinary policies of the BOJ that have not only included the outright purchase of bonds, but also the purchase of ETFs and REITs.
I have had the opportunity to visit many central banks around the world. Typically, central banks focus on their role in maintaining price stability by combatting inflation. It was fascinating to witness the communications strategy employed by the Bank of Japan. In order to gain the support for their policies among the public, the Bank is focusing on its efforts in battling deflation. I watched a video that the Bank uses to explain its role to the public, it uses an animated character to highlight the banks role in battling the evils of deflation.
I have included the images from the Bank’s brochure below:
It’s clear that the Bank’s aggressive monetary easing has raised confidence and pushed Japanese stocks higher. It seems clear that the job is not done…the market has discounted the exit from a deflationary environment, but the facts on the ground in the actual economy are still tenuous. Everyone I talked to expects a continuation of aggressive monetary easing. If it does not happen, Japanese stocks are likely headed lower. As we have discussed repeatedly on our weekly webinars, we live in a time when Central Banks rule the world. It is clear that the Bank of Japan rules Japanese financial markets.
Special thanks to Brennan Staheli, Joe Dunbar, and the Lunt Capital team for their contributions to this report.