Paul Krugman’s dream for Japan is finally coming true as BOJ embarks on a round of massive monetary expansion.
Paul Krugman (NYT): – Let it not be said that the scribblings of academic economists have no effect. Some of us have been urging the Bank of Japan to get truly aggressive and adventurous on monetary policy — and it’s happening!
And it only took 15 years.
Seriously, this is very good news. Japan is finally, finally making a real effort to escape from its deflation trap. We should all hope it succeeds.
Liquidity moves markets!Click here to learn how you can follow the money.
Indeed we should all hope that Japan’s central bank can solve the nation’s problems, which are ultimately structural in nature. Krugman is referring to the ongoing deflationary trend resulting from the burst of Japan’s property bubble – as shown in the land price index below.
|Source: Land Institute of Japan|
Japan’s monetary base has already expanded dramatically in the past three years and is now expected to grow to multiples of that.
|BOJ Monetary Base (source: BOJ)|
Markets have responded in a “textbook” fashion. The yen sold off sharply, while banks and property shares rallied.
|Daiwa ETF TOPIX-17 Banks (Bloomberg)|
|Daiwa ETF TOPIX-17 Real Estate (Bloomberg)|
The “reflation” of Japan is on.
From our sponsor:
Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.