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Bank Of Japan’s possible stimulus expansion


Bank Of Japan’s possible stimulus expansion

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Japanese Yen, US Dollars and German Marks

Just in case you didn’t notice, the world is currently witnessing a currency devaluation war. While the United States has wrapped up its experiment with quantitative easing for now, Japan and the EU are in the trenches of the anti-deflation wars. Central banks are so worried about deflation that they are spending trillions of dollars’ worth of local currency on bond buybacks and other schemes to inject tons of cheap liquidity in the market. Boosters of such schemes say that the money will eventually find its way to where it counts-main street. As more and more money is available for loans, eventually some of this will generate jobs and boost the economy. The end result will be more spending and prices will rise.

Well, in the case of Japan, the quantitative easing game plan hasn’t exactly panned out. After pumping tons of liquidity into the market that put the yen into a tailspin, all the Bank of Japan has to show for all its bold efforts is a 1% inflation achievement-down from its original 1.7% forecast. The official inflation target is 2%. That’s simply not going to happen. What was the fly in the Bank of Japan’s ointment-crashing oil prices. Thanks to the Saudi Arabian-based plan to crash oil prices to force North American shale oil and Canadian tar sand producers out of business, there’ s a glut of oil flooding the global market. This has reduced prices in Japan and the BOJ’s inflation dreams look more remote than ever.
This lack of success has analysts speculating about a possible situation where the BOJ will double down on its anti-deflation campaign and increase the amount of liquidity its pumping into the market. Expect the yen to remain weak or even get weaker. As far as actual inflation generation, that’s still anyone’s guess at this point in time.


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