Bank of Japan Takes Center Stage

Although the Federal Reserve is usually the more closely watched Central Bank by financial market participants, with a building consensus that interest rates are likely to remain steady, the focus has firmly shifted to the Bank of Japan where the outcome is less certain. Analyst forecasts for the BoJ's next move vary widely. While a majority expect a rate cut deeper into negative territory, some say Governor Haruhiko Kuroda may instead decide to change the size and make-up of the Central Bank’s asset purchases program by “twisting” the maturities. Furthermore, the BoJ’s propensity to surprise financial markets has created further uncertainty, with most investors deciding to stay on the sidelines until the event has passed. US markets closed Monday flat, while those in Asia are marginally lower in early Tuesday trade as USDJPY continues to consolidate and move lower ahead of the announcement on policy.

China is edging towards a large scale financial meltdown that could wreak havoc across the globe according to a damning report from the world's central bank watchdog, the Bank for International Settlements. The BIS reckons that the pace of credit growth relative to the country’s GDP is of serious concern and could lead to widespread financial overheating and economic distress. The BIS said that any score above 10 is a cause for worry. China's gap stands at a massive 30.1 – much higher than that of the U.S. before the start of the 2008 crisis. This comes on the heels of surging home prices across China which has coincided with lower borrowing from businesses concerned about the outlook. In the meantime, Chinese Premier Li Keqiang has telegraphed to markets that the Yuan exchange rate will be kept “basically” stable ahead of meetings with US President Barack Obama in New York.