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Alternative Market Briefing

The Big Picture: Many negative reactions to Japan’s unprecedented monetary stimulus

Friday, April 12, 2013

Haruhiko Kuroda
An Opalesque column for global macro investors.

Benedicte Gravrand, Opalesque Geneva:

Japanese Prime Minister Shinzo Abe, a liberal democrat, came back to power in December 2012, and his country has been making waves in the financial markets ever since. He put forward a plan to weaken the currency, boost the country’s economy, and to reach a 2% inflation level within two years through "bold" monetary policy and flexible fiscal policy. Monetary stimulus is the first part of this economic recovery plan. The fiscal stimulus plan will be revealed later this year.

On 4th April, the Bank of Japan’s policy board, headed by new Governor Haruhiko Kuroda, approved its economic programme to launch massive monetary stimulus (double the monetary base, unify and expand all bond-buying schemes and aim for an inflation rate of 2% year on year). The bank will boost its buying of Japanese government bonds by 50 trillion yen ($520bn) per year and plans to buy 30 billion yen ($323m) of Japanese real estate investment trusts and one trillion yen ($10.5 bn) of exchange traded funds annually, according to Forbes. Total expansion of the monetary base will be about 10% of Japan’s gross GDP – whereas the Fed’s $85bn monthly purchase of treasuries and mortgages securities amount to 6.8% of the $15.1tln U.S. gross GDP.

(Note that ......................

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