At day’s end in Japan, the question is the money supply in deficit or expansion

The first question is what is Monetary Policy. Its a money number. For the BOJ as of February 15 = 6,670,700 billion yen. On February 16, The BOJ didn’t perform any market transactions at the normal 9:20 am Japan time or 7:20 EST. A 2nd possible time for BOJ transaction occur at 10:20.

An OIS rate is an interest rate at each maturity from overnight to 1 month. At each maturity is associated with a percentage to possible interest rate changes at the next BOJ meeting. Meetings are 6 weeks apart or 30 to 35 trade days. Interest rates change daily therefore OIS and percentages adjust daily. Today’s OIS and percentages will change tomorrow then the next day.

An OIS rate is also called a Swap Rate as money is exchanged for an interest rate at a period of time from overnight to 40 years. The real question is where is the money going, up or down, to expand or contract. And the relationship to the interest rate as money and interest rates share an adverse relationship.

This answers the question what is monetary policy. Its the relationship between money and interest rates. Today’s BOJ monetary Policy is 6670, 700 billion Yen to a 0.99 interest rate. If money travels higher then interest rates trade lower. If money supplies trades lower then higher goes interest rates. The OIS rate and percentages at each maturity captures the change to interest rates and money supplies and adjusts daily.

The value of the daily money supply and interest rates depends on today’s BOJ activities. Is the BOJ buying or selling interest rates, JGB’s, T Bills, corporate bonds. Is the BOJ borrowing or lending money. Is the BOJ providing collateral to lenders. Is the BOJ adding or subtracting from reserves and its current account. Is the BOJ doing nothing today.

At day’s end in Japan, the question is the money supply in deficit or expansion. Something like money X Volume and number of transactions determines the next day’s interest rate by averages. In this regard, we are dealing with banks as experts to trade interest rates. Banks are the traders competition in markets as well as central banks. Foreign banks are included.

Reported yesterday was a 26% chance for the BOJ to change interest rates at the March 18 meeting. The 26% percent number is a worthless number to report as interest rates, OIS and percentages will adjust far and wide. Its impossible to say with any certainty the 26% will hold in 3 weeks.

 The Japanese numbers are 100% perfect becuse the numbers are perfect to the interest rate, maturities  and money supply. The Fed Watch Tool misses the real number as OIS and offers probabilities that may or may not be correct. We find more wrong than right.

The comment in previous posts, The Japanese system of interest rates is different and unique to the remainder of the world’s central banks. Know this, so much more is going on to the BOJ than what is shown today. The Japanese and banks have these covered and in far more tiny details.

Japan’s fiscal management is very different from countries with triple-A long-term government bonds.

 The US and UK also have fairly lax fiscal management.