07-31-2016, 02:10 AM
Article 5 of the Public Finance Act prohibits directly underwriting newly issued JGBs other than "in exceptional circumstances," and also requires any such exception to be authorized by the Diet, the Japanese Legislature. But a new Credit Suisse research note reports that the central bank does, in fact, underwrite JGBs upon maturity. This is a process known as "BOJ rollover," because when government bonds owned by the Bank of Japan are retired, the proceeds can be used to underwrite government bills for the purpose of rolling over the government's debt. Credit Suisse also calls the process a "stealth weapon" because the operation has already been preapproved by the Diet — a sort of permanent exception.
The Bank of Japan has a 'stealth weapon' at its disposal - Business Insider
Prime Minister Shinzo Abe's promise of a hefty fiscal stimulus package, revealed by Japanese media on Wednesday, has effectively forced the Bank of Japan to come up with matching monetary ammunition at the close of its two-day meeting on Friday.
Shinzo Abe's fiscal stimulus talk puts onus on Bank of Japan to ease
While economists crib about delayed structural reforms and incomplete fiscal consolidation, stock owners would give Prime Minister Shinzo Abe’s economic revitalization plan more than a passing grade. When it comes to return on equity, 143 companies in the Nikkei 225 index are in better shape now than they were four years ago, whereas only 72 have seen their fortunes dwindle. Breaking down return on equity into its constituents, it's clear much of the improvement is a product of healthier profit margins. Companies have succeeded in turning a weaker yen into a competitive advantage, which is why the fear of the exchange-rate tailwind turning into a headwind is demoralizing investors.
Decoding Abenomics - Bloomberg Gadfly
Disdain for Abenomics is also forgetful, failing to recall the grimness of late 2012, when deflation seemed inescapable, the yen was export-sappingly strong and the Nikkei 225 stockmarket index, now above 16,000, languished below 10,000 (it peaked at nearly 39,000 in 1989). Compared with past efforts to revive Japan, Abenomics has achieved a great deal. It has defeated core deflation (excluding energy prices); lifted companies’ profits and dividends; expanded employment, especially among women and the old; and sprinkled Japan with a light dusting of gentle reforms that may hold the promise of more radical future ones. In early 2013, for instance, few believed that Japan would sign the Trans-Pacific Partnership, an ambitious free-trade agreement among 12 countries: it did (though the TPP’s fate now rests on American politics). Against the will of the country’s powerful business lobby Mr Abe introduced a corporate-governance code and guidelines to oblige shareholders to be more active.
Three-piece dream suit | The Economist