Bank of Japan Stays the Course

The Bank of Japan made the move to maintain monetary policy overnight, citing an economy that is experiencing a “moderate” recovery with fundamentals gradually improving. Although not unanimous in the decision with one member of the Policy Board dissenting against the increased purchases of real estate investment trusts (REITs) and exchange-traded funds (EFTs), no policy changes are expected in the near future. BoJ Governor Haruhiko in comments this morning did reiterate that inflation is projected to return to the 2% target in the 1^st half of fiscal 2016 as the decision to preserve easing measures continues to help the economy meet those goals. In a boost to monetary policies, investment and capital expenditures are rising, increasing the efficacy of the Central Bank’s efforts. However, there are questions about the pace of exports which have slowed as Kuroda tries to jawbone the Yen higher.

After raising the ceiling on the Emergency Lending Assistance program to Greek banks by EUR 1.1 billion earlier in the week the ECB is planning to hold a meeting with Greek officials today as the Central Bank might be preparing to end loan assistance to the nation’s embattled banking system. If this is the case and the ECB stops backstopping Greek banks, it could threaten to bring down the government as Greek protests revive. It was revealed yesterday that deposit outflows continue to pick up momentum after the banking system experienced EUR 2 billion in withdrawals in three days. With negotiations in tatters and the latest Eurogroup meeting an abject failure, the probability of an exit continues to rise as the Greek’s refuse to negotiate on the key sticking points. While it has been rumored that the ECB and Euro Area are preparing to take haircuts on Greek debt holdings, not such decision has been made public yet.