Sunday, November 9, 2014

Bank of Japan about to Bring Trillions of Dollor into Their Economy


Japan
If reports have to be believed, the bank of Japan is expected to bring in $705374400000 per year in their financial system and this is primarily through buying of government bonds. This can be considered as one of the measures to fight against the rising threat of deflation in the country. According to the Japanese policymakers they are planning to invest more in the Japanese economy; this has not only come as a surprise but also brought out happiness among the international investors.
What is the plan?

According to Haruhiko Kuroda, who is the bank’s governor, policymakers have tried every trick to avoid facing deflation again and they want to make sure that the same can be avoided for a long period as it has affected the Japanese economy for decades. Policymakers will try to do everything possible to tackle deflation.

The Bank of Japan has completely has taken a U-turn and increase response towards their quantitative easing (QE) programme and looking for further expansion. This is a week after the US Federal Reserve had made the announcement that it is the correct time for the bond-buying programme. The central bank in Japan was before bringing in about $525085800000 to 612600100000, in their economy and this has indicated a halved growth according to the forecast.

What was the impact? 

If the effect of the increases Sales tax from 5% to 8% in April is removed, the yearly inflation came down by 1% in September which is exactly half the target which was set by the central bank. Further, they are expecting inflation to come down due to the decreasing price of the oil and also the decrease in the spending from the consumers due to increase sales tax.

Although this move from the central bank is considering the Japanese economy, there decision indicated a floating international market and thereby affecting the value of the Yen which saw near-seven-year low when compared to the US dollar.

This decision also impacted the Asian markets, which closed at a higher rate and this was due to the Japan’s Nikkei 225 index which showed an increase of 4.8%. With the all the indices showing an upward trend which included UK’s FTSE 100, again up by 1%, investors around the world has a lot to cheer about. If reports have to be believed the value of the US dollar against the Yen was at 1 dollar= 111.53 yen and this was the highest value reported for the US currency since 2008.

According to a global economist, Anna Stupnytska at Fidelity Worldwide Investment, the decision of the Bank of Japan to expand their monetary easing programme came as a surprise which added to the fact as it was just weeks after Federal bank’s decision to end their quantitative easing.

But she also stated that on a broader spectrum, this actually doesn’t resolve the decreasing growth expectations on a long term basis, which is the main reason behind the decreasing wage growth and negative investments. Monetary policies are a short term answer to the current economical issues, but can’t be considered as a permanent solution.

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