Further easing from BOJ would be difficult

Bank of Japan (BOJ) has sought to monetary easing through asset purchase (Govt. Bonds, ETFs,REITs) since 2012 against which Japanese stock index Nikkei has returned more than 80 percent and yen fell close to 50 percent against the dollar. BOJ also has increased the pace of purchase in October 2014.

Further easing seems difficult.

• Current pace of purchase has already reduced the liquidity in the world's second largest bond market. Bank of Japan's purchase is already crowding out. In some issuance BOJ is gobbling up more than 80 percent of issuance.

• At this rate of purchase BOJ would soon hold about 40 - 50 percent of the Japanese debt.

• BOJ officials including governor Kuroda dropped the target date to reach inflation above 2 percent. This implies that the bank is running out of tools to reach the objective.

• As the inflationary result is not convincing despite the fall in yen, the criticism of the policy is growing heating up the debate among the BOJ members.

• Japanese consumers are not helping the BOJ much, as they cut down their purchase.

• At recent comments, BOJ member Koji Ishida expressed that the purchase accelerator is pressed at floor.

Yen is currently trading 118.9 still within its current band of 118 & 120, has not taken notice. The range trade is expected to continue until further queue comes from the dollar side.