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Showing results for tags 'japanese economy'.
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Folks are invited to discuss about the Japanese economy, their currency and their relationship. I recently came to know that Japan is back in the news because of its Quantitative easing and depreciating currency. Will Quantitative Easing Be Japan's Savior ? Lets discuss . Japan is the fourth-largest economy in the world. Issue - The country remains in a deflationary environment due to a variety of factors. Employment is down, the population is aging, the Yen (Japan’s currency) is weakening, and there is very little immigration into the country. Japan’s New Idea to tackle the issue The new idea is not new at all. More quantitative easing, but this time on a massive scale. The program, recently announced by the new governor of the Bank of Japan, Haruhiko Kuroda, is for a cash infusion of $1.4 trillion by the end of 2014. The hope is that this new round of QE will transform the economy from a deflationary environment to one of 2% inflation. Japan’s version of quantitative easing is 60% larger than the United States. But will it work? Much like in the United States, the armchair politicians and economists are hard at work debating the issue. Some believe that previous quantitative easing proved fruitless so there is no reason to believe that it will work this time. Even if it does work, Japan will be left with even more public debt. Its debt load is currently 214% of GDP with a quarter of the country’s budget going to service that debt. If this round of QE does create inflation, interest rates will rise. Others are supportive of the plan. The IMF’s Christine Lagarde said that the newly announced plan was a step in the right direction. Others applauded the effort as a big solution to a big problem. Impact on Currency Forecasts call for the Yen to continue weakening to 105 against the U.S. dollar by the end of 2013 and 110 in 2014. Market Impact Whether or not QE in the United States aided in the economic recovery will likely be a debate that lasts for decades, but nobody argues that the markets have seen considerable appreciation since the program was announced. Regardless of the reason behind the market rally, investors are betting that Japan’s markets will see the same effect. Actions to be Taken If this new round of QE does for Japanese markets what it has done for U.S. markets, a bullish position on the Japanese economy through equity, bond, or total market ETFs may be warranted. Currency traders may try to take advantage of the weakening Yen in the Forex market. However, investing in international markets is difficult for retail investors due to the relative lack of information available.
