Bank of Japan's 'Audacious' Easing Confronts Deflation, Boosts Balance Sheet

“The BOJ seemed to take a leaf out of Sun Tzu’s “The Art of War” with the swift timing and formidable scope of its new monetary expansion.” - By Sachin Gupta and Tomoya Masanao, PIMCO

Below summary by Anthony O'Brien

On October 31, at the end of its monetary policy meeting, the Bank of Japan (BOJ) surprised markets by announcing additional monetary easing. This was the first significant increase in the BOJ’s Qualitative and Quantitative Easing (QQE) program since its launch in April 2013.

Under the increased QQE program, the BOJ will expand its monetary base at an annual rate of ¥80 trillion. At this pace, its balance sheet as a percentage of GDP, a figure which has already eclipsed those of other major global central banks, will reach 75% by the end of 2015.

In a separate announcement on the same day, the Government Pension Investment Fund of Japan (GPIF), Asia’s largest public pension fund, unveiled plans to change its asset allocation.

These two announcements actions could have a major and lasting impact on asset valuations within Japan and across the global investment landscape.

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