BoJ: faces big challenges and could be forced to cut rates

The BoJ is under the spotlight this month and is very much in play, however, markets are taking the view that they are running out of ammunition in respect to their bond buying programme.

The BoJ is currently buying up the equivalent of more than %750 billion worth of government debt annually as they attempt to reach their inflation targets and support growth in the stagnant economy. However, at such a rate, banks could run out of debt to offer within the next 18 months according to analysts as recently reported in the Wall Street Journal.  

The value of the Yen is at uncomfortable levels for the BoJ and it has rallied by 18% this year alone. With the Federal Reserve facing their own challenges, the price of the dollar could be set to fall even further as markets begin to lose faith in the Federal Reserve, adding to downside pressures in USD/JPY and strengthening the Japanese currency. Such an outcome could ultimately force the BoJ to cut interest rates even further while a corporate debt model, such as the ECB's, could be difficult considering it is a relatively small market in Japan.