Post #2307 by zeelotes on the Mechanical Investing board

Investment Strategies / Mechanical Investing

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It seems to me that this was inevitable. Japan's central bank has basically provided liquidity for the other central banks to remain over tight in their monetary policy. As long as they did everything was fine, but once they began telegraphing their intent to end quantitative easing, it was a certainty that the borrowing of yen for free, converting that yen to dollars, and investing those dollars in the highest quality dollar-denominated assets would end. It had to.

https://www.ft.com/content/599790b6-abf1-4ca5-a1d9...

https://www.japantimes.co.jp/business/2024/07/31/e...

At its two-day policy meeting, the BOJ voted to increase its short-term policy rate target to 0.25% from a range of 0% to 0.1%. It also said that it would reduce its buying of government bonds through March 2026. An institution that had recently earned a reputation for being wishy-washy and making missteps instead acted decisively and with resolve. Just days before, the vast majority of analysts polled forecast that the central bank would remain dovish and leave rates unchanged until September or October in order to gather more data.

I've been thinking about the potential inevitability of Japan's central bank doing exactly this all year.

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