Board-Ansicht
Mix-Ansicht- was passiert mit den japanischen Deviseninterventionen - EM-financial, 13.02.2004, 16:28
- mƶglicherweise kƶnnen sie sich bald ein wenig zurĆ¼cklehnen - kingsolomon, 13.02.2004, 17:36
was passiert mit den japanischen Deviseninterventionen
-->Foreign investors interested in intervention money
We are receiving inquiries from overseas investors on a daily basis about whether currency intervention is sterilized or unsterilized and where the massive intervention funds are going. In this piece, we review changes in the BoJĀfs balance sheet accompanying intervention.
Impact on the BoJĀfs balance sheet of currency market intervention
We summarize below the mechanism by which the short-term securities used by the MoF to raise intervention capital reach the private sector.
FB issuance and BoJ underwriting: The MoF issues FBs to raise intervention capital, and the BoJ directly underwrites this issuance creating credit (Increase in FBs under assets and government deposits under liabilities).
Yen-selling, dollar-buying intervention: Yen-selling intervention by the MoF reduces government deposits. Private-sector bank deposits (current-account deposits held at the BoJ) increase since yen capital used for intervention is paid to private-sector banks, the BoJ counterparts (government deposits decline and private-sector bank reserve deposits increase under liabilities).
Increase in private-sector bank deposits from intervention absorbed (sterilization): Yields will decline if the intervention is unsterilized (excess money is left in the system) unless the market interest rate is zero. In a ZIRP environment, however, unsterilized intervention does not have any economic significance since yields have no room to move lower, even if the BoJ leaves money in the system. The bankĀfs current policy framework keeps current-account deposits within a defined range (currently at 30-35 trillion), and it manages intervention capital jointly with daily fiscal and other capital flows (receipts and payments). When it anticipates current-account deposits exceeding the target range, the bank absorbs capital with repurchase agreements or bills for sales (private-sector bank reserve deposits decline and bills sold increase under liabilities).
FB redemption: When FBs issued by the MoF to raise intervention capital come due (in fact, the MoF typically redeems FBs prior to the redemption deadline), the BoJ redeems bills sold on the liabilities side accordingly (FBs decline under assets and bills sold decline under liabilities).
Government short-term securities issuance: The MoF uses government surplus capital to redeem FBs, and this must be replenished by issuing new liabilities. The government issues short-term securities (TBs) in the market to replace FBs and finances intervention with private-sector capital. Foreign reserves (mainly US Treasury bonds, notes and bills) increase under assets, and FBs or TBs increase under liabilities on the MoFĀfs special account; and cash declines and TBs increase on private-sector bank balance sheets).
The intervention process results in increases in foreign reserves and government short-term securities on the government balance sheet (foreign currency special account). While the BoJ balance sheet temporarily expands through credit creation from its initial underwriting of FBs, balance sheet value declines with FB redemption and expiration of bills sold. Intervention money winds up in government foreign currency reserves, and BoJ balance sheet expansion only occurs temporarily to absorb intervention capital. This implies that BoJ balance sheet value and monetary policies are not directly linked. When the BoJ issues bills for sale to absorb capital, for example, the balance sheet expands despite implementing draining operations.
Conditions for intervention money to stimulate the real economy and asset markets
The BoJ merely carries out currency intervention on behalf of the MoF as an agent. Most of the above-mentioned changes in the BoJ balance sheet hence are passive. The only step where it has room to exercise discretion is whether to absorb (sterilize) intervention capital. Yet the economic effect of unsterilized intervention is no different than a rate cut. With JapanĀfs short-term money markets already at the zero-interest rate limit, unsterilized intervention no longer has any significance.
Some investors, meanwhile, have recently questioned why the bank is conducting draining operations for intervention capital at a time when the stock market is encountering upside resistance. This line of thinking ties the recent slowdown in monetary base and money supply growth to the lack of unsterilized intervention and ĀgresultingĀh yen strength. We believe these views are misreading the causal relationship and quantitatively incorrect.
Private-sector (domestic banks) and public-sector (BoJ, FILP capital) financial institutions hold the bulk of government short-term securities (67.2 trillion at end-September 2003) issued to raise intervention capital, including a large portion from the former (38.0 trillion). Yet these institutions are voluntarily selecting short-term securities in their asset allocation, and there is no government requirement. Private-sector asset preference must change for excess liquidity from massive intervention funds to stimulate the real economy and asset markets. The private sector determines whether portfolio rebalancing of excess liquidity to real assets or financial assets other than (short-term) securities takes place, regardless of the BoJĀfs draining operation stance. This requires increased private-sector confidence that the real economy offers more attractive opportunities than cash or cash-equivalent assets, such as short-term securities with a zero interest rate. While it is easy to heap blame on the central bank, the real issue is the dearth of private-sector confidence, not sterilized or unsterilized intervention.
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