During the selloff in December, the BOJ shed $31 billion, but in January it piled on.
Total assets on the Bank of Japan’s mammoth balance sheet, after a drop of ¥3.4 trillion ($31 billion) in December, rose by ¥4.8 trillion ($44 billion) in January, to ¥557 trillion ($5.1 trillion), the BOJ reported this morning. This shows two things:
One: The balance sheet is now 101.5% of Japan’s nominal GDP (¥549 trillion, not adjusted for inflation), which makes it over five times as large in terms of the economy as the Fed’s $4-trillion balance sheet, amounting to 19.6% of US nominal GDP ($20.6 trillion). This is how crazy the situation at the BOJ has become:
Two: The BOJ is now proceeding with its QQE – “quantitative and qualitative easing,” as it calls this monster – in a special sort of dance: Two steps forward, one step back – increasing its balance sheet two months in a row, then in the third month unwinding about one-third of the increase of the prior two months.
This dance series started in December 2017. December 2018 had been the fifth step back. And January was the next step forward. Among QE-besotted central banks, this dance is unique. This chart shows the month-to-month changes of the balance sheet. Note that the December “step back” was maintained despite the selloff in the markets:
The above chart shows that last December, the BOJ cut its balance sheet by ¥3.4 trillion ($31 billion), a larger cut than the Fed’s QE unwind in December ($28 billion). In September, the BOJ chopped its balance sheet by ¥5.4 trillion ($49 billion), larger than the Fed’s...