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Bank of Japan to introduce unlimited QE on government bonds

April 28, 2020


Abstract : The operation will concern government bonds, while the purchases of corporate bonds are being simplified. A similar move is expected to be made by the ECB on April, 30. In the meantime, the revenues of the Chinese industrial companies decreased by 36.7% in the quarter.

MILAN, Apr. 27 (Class Editori) - Today, the Central Bank of Japan has announced an unlimited QE on government bonds, by removing the previous ceiling of 80 thousand billion yen per year. Moreover, the BoJ has also extended the program to the debt issued by industrial enterprises and trade companies and has simplified the rules for bond purchases. The Federal Reserve has already made this move (the next meeting is scheduled for April, 29), while the markets are waiting for the European Central Bank, which has already scheduled a new meeting on April 30, to announce the extension of the purchases, including the fallen angels and the companies with junk bond status (only the first two levels) due to the coronavirus pandemic.

The markets have evaluated the move of the BoJ very well, and today at 07:05 Italian time the Nikkei recorded +2.7%, while the Hang Seng increased by 1.9% and Shanghai recorded +0.8%. Gold increased by 0.45% to 1,743 dollars per ounce; Euro grew by 0.18% to 1.0842; Yen increased by 0.2% to 107.27 and Pound surged by 0.53% to 1.2430. The yield of the 10-year USA T-Bond grew from 0.6% to 0.62%, while the futures on Wall Street are performing well (+1%).

Today, the Asian analysts have been focusing on the Central Banks’ moves, which seem to be increasingly more coordinated. “According to the FED, there are no further developments expected regarding QE or interest rates; however, we expect that during the next meeting it will highlight that its politics will be in force on indefinite duration in order to support the economy”, as AZN has written in a note. The brokers added their expectations: “the ECB will increase its purchase package’s size of emergency bonds (PEPP) amounting at about €500 billion to 1,250 billion in total, and will keep on insisting on the need of a substantial fiscal stimulus”.

Meanwhile, the profits of the Chinese industrial enterprises have decreased by 36.7% on annual basis to ¥781.45 billion in the January-March interval due to the coronavirus epidemic. The quarter includes the closing period of the activities in the country and also the initial date of reopening. The quarterly reading follows the fall by 38.3% recorded in January-February, which has been the most accentuated fall since at least 2010. The profits of the industrial State-owned enterprises (the largest groups in China) have dropped by 45.5% and those of the private sector have decreased, instead, by 29.5%.

(Source:Class Editori)

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