The Bank of Japan is trying to convince the market that there is “nothing to see here” despite a sharp drop in its asset purchase flow from ¥80 trillion to ¥60 trillion per annum. Add this to the list of reasons to worry about potential yen appreciation, but don’t think of it as a leading concern for global rates or risk assets.
The consensus remains bullish on India even after, or perhaps because of, recent currency reforms. We beg to differ. While Modi’s reform efforts have been impressive, only rivalled by Mexico following the global financial crisis, India still faces significant cyclical headwinds.
When the global financial crisis broke, central banks in the West copied from the Japanese playbook and introduced quantitative easing to boost growth and inflation. Now it is Japan's turn to borrow from the West with NIRP (negative interest rate policy) - are they running out of options?