Having spent 20 years in the economic doldrums Japans new Prime Minister has attacked the stagnate economy with massive QE. The Bank of Japan is preparing to boost its balance sheet to 60 per cent of GDP by next year. In ther words its printing extra money to the equivalent of Turkey . Its a massive boast to the Japanese economy and think ultimately to the World economy. The US is picking up nicely, China is doing well, all it needs now is a European reaction. So far the only reaction from Europe is the European Central Bank primed the markets for a possible cut in interest rates to 0.5 per cent as soon as next month.
The massive QE in Japan caused the yen spiralled downwards as Haruhiko Kuroda, the new Governor of the Bank of Japan, used his first policy meeting to jettison the ultracautious approach championed by his predecessor and announce a doubling of his balance sheet in an explicit attempt to hit a 2 per cent inflation target.
The Bank of Japan’s radicalism surpassed analysts’ expectations: it is preparing to boost its balance sheet to 60 per cent of GDP by next year as it gobbles up government bonds and other assets.
Investors should consider more exposure as the World economies start recovery, and limit exposure to Govt Bonds. At some point interest rates will raise and when they do expect a massive fall in bond values.
Nigel Green deVere Group
Blog written April 6th