If policy makers around the globe fail to
gain traction soon with their actions, that risks a relapse into too-low
inflation and even weaker growth, possibly roiling financial markets
and increasing the threat that Japan-style stagnation spreads to more
advanced economies.
BOJ Governor Haruhiko Kuroda’s freedom to double down on
stimulus to stoke inflation and growth may be limited by G-20 agreements
to avoid the competitive devaluation of currencies. He’s also up
against critics in the investment community who argue that the central
bank is harming the debt market and is on the cusp of running out of
bonds to buy. The 71-year-old governor
maintains that all options are on the table, including a deeper cut to
the negative rate, and increased purchases of assets ranging from
Japanese government bonds to exchange-traded funds and real estate
investment trusts.
Link: http://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/japans-negative-interest-rate-brings-bad-news-to-worlds-central-bankers/article29580535/
This article is interesting because if a policy to stabilize prices and growth in Japan doesn't work then other countries in a similar situation should be mindful of Japans' situation and think about putting measures such as stimulating more investment, creating more jobs, and slightly raising inflation into play.
ReplyDeleteMy question is what will happen if, as to continue quoting the article; "He’s also up against critics in the investment community who argue that the central bank is harming the debt market and is on the cusp of running out of bonds to buy." this meeting doesn't go as planned and economic sanctions are taken upon an already struggling economy. The smartest move would be to prevent additional bonds from being bought, which could perpetuate this cycle. Though if all bonds are bought, what then would happen to these rates?
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