Here's how Bank of Japan’s recent monetary policy decision will work out
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Two decades of stagnation and a high debt coupled with a need to boost demand has meant that the task is not an easy one to achieve. This is where the bond buying program was initiated by the BOJ under the leadership of the BOJ governor Haruhiko Kuroda.
But the success has been mixed. The negative interest rate announcement is the first time for BOJ and was a 5-4 close tie in favour of
It is interesting to see how the latest decision falls in line with the broad program of 'Abenomics' which is based on the three arrows of fiscal boost, monetary expansion and structural reforms. So far, the work on all three is an ongoing program but still outcomes have yet to prove that ''Abenomics' has been very successful. Monetary stimulus is a major component in 'Abenomics', and the BOJ seems to be fighting the 'deflationary mindset' which might just put Japan back in the throes of deflation.
It must be noted that the (QQE) with negative interest rate' is designed to enable the BOJ to 'pursue additional monetary easing across three dimensions, combining a negative interest rate with quantity and quality'. Another feature is that it comes post the resigning of the Economy Minister of Japan Akira Amari over allegations of bribery yesterday.
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Last week in an interview with Shekhar Gupta, on NDTV's 'Walk The Talk',
For India and other economies, it means that the era of easy money is not over despite the Fed increasing rates once in the past year. With the Bank of Japan and ECB engaged in bond buying programs the era of easy money may well not be over. Over the next year, significant developments are in stock in the monetary policy space the world over. The BOJ is just the beginning.
(The article is co-authored with Sankalp Sharma, Senior Researcher at the Institute for Competitiveness, India. Amit Kapoor is Chair, Institute for Competitiveness & Editor of Thinkers. The views expressed are personal. He can be reached at amit.kapoor@competitiveness.in and tweets @kautiliya)
(Image: Reuters)
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