Bank of Japan's 'Audacious' Easing Confronts Deflation, Boosts Balance Sheet
“The BOJ seemed to take a leaf out of Sun Tzu’s “The Art of War” with the swift timing and formidable scope of its new monetary expansion.” - By Sachin Gupta and Tomoya Masanao, PIMCO
Below summary by Anthony O'Brien
On October 31, at the end of its monetary policy meeting, the Bank of Japan (BOJ) surprised markets by announcing additional monetary easing. This was the first significant increase in the BOJ’s Qualitative and Quantitative Easing (QQE) program since its launch in April 2013.
Under the increased QQE program, the BOJ will expand its monetary base at an annual rate of ¥80 trillion. At this pace, its balance sheet as a percentage of GDP, a figure which has already eclipsed those of other major global central banks, will reach 75% by the end of 2015.
In a separate announcement on the same day, the Government Pension Investment Fund of Japan (GPIF), Asia’s largest public pension fund, unveiled plans to change its asset allocation.
These two announcements actions could have a major and lasting impact on asset valuations within Japan and across the global investment landscape.
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Frequently Asked Questions about this Article…
The Bank of Japan has announced an expansion of its Qualitative and Quantitative Easing (QQE) program, increasing the monetary base at an annual rate of ¥80 trillion. This move is aimed at combating deflation and boosting the economy.
With the new monetary easing measures, the Bank of Japan's balance sheet is expected to reach 75% of GDP by the end of 2015, surpassing other major global central banks.
The Bank of Japan increased its QQE program to address deflationary pressures and stimulate economic growth, surprising markets with the scale and timing of the announcement.
On the same day as the BOJ's announcement, the Government Pension Investment Fund of Japan revealed plans to change its asset allocation, which could significantly impact asset valuations both in Japan and globally.
The BOJ's expanded QQE program and the Government Pension Investment Fund's asset allocation changes could have a major and lasting impact on asset valuations, influencing global investment markets.
A balance sheet reaching 75% of GDP indicates the BOJ's aggressive monetary policy stance, highlighting its commitment to combating deflation and supporting economic growth.
The BOJ's balance sheet as a percentage of GDP is set to surpass those of other major global central banks, showcasing the audacity and scale of its monetary easing efforts.
The long-term effects of the BOJ's monetary policy changes could include altered asset valuations and shifts in global investment strategies, as investors respond to Japan's economic adjustments.
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