Japan’s Stimulus Generates Ripples
Japan’s monetary easing strategies have brought drastic movements in the value of their currency. The Japanese Yen is now at its lowest level since April 2009, and for the past 7 months has declined 29% against the Dollar. Although the current economic strategies adopted by the Bank of Japan are aimed at reaching their inflation goal of 2%, it has also driven down demand for their government bond market. Because of the lowered interest rates, investors are pulling out their investments in government bonds and seeking others that provide higher yields.
Experts often compare Japan’s monetary easing strategies to how the Fed has dealt with the U.S. economy since late 2008. Since the Fed has launched its stimulus program, it has cut interest rates to its lowest point in decades, and is conducting large-scale asset repurchase programs in order to stimulate consumption and job market growth, which is exactly the strategy adopted by the Bank of Japan.
Examining the current economic movements in Japan is important in the global economy because the value of their currency greatly affects the demand of other currencies as well as prices in the global marketplace.
The Wall Street Journal