Friday, December 21, 2012

Bank of Japan’s Abenomics: 50 Trillion Yen Monetary Stimulus in 2013

So the electoral victory of Shinzo Abe has finally ushered the era of "Abenomics" or Mr. Abe's economic policies based on the elixir of inflationism

Japan's central bank will inject more than 50 trillion yen in new funds over the next 12 months aimed at boosting economic growth and will review its monetary policy goals next month, fueling speculation that it will raise its target for inflation.

The Bank of Japan (BOJ), which launched its asset purchase program in October 2010, said it would increase the size of the program by a further 10 trillion yen to about 101 trillion, buying 5 trillion yen of Treasury discount bills and 5 trillion worth of Japanese government bonds.

The additional purchases over the next 12 months, inclusive of those already decided, will amount to about 36 trillion. In addition, the BOJ regularly buys bonds at the pace of 21.6 trillion annually.

Under the Stimulating Bank Facility, which was launched in late October, the bank expects lending to reach more than 15 trillion yen. The new facility aims to provide long-term funds at a low interest rate, without any limit, to financial institutions at their request.

Combining these two programs, the BOJ said the amount outstanding would exceed 120 trillion yen.
Central banks of major economies have been ramping up the ante of digital era inflationism anchored on hope for a magical outcome

For the meantime yes, such huge amount of money should be expected to favor or boost asset prices not only in Japan, but should also spillover to parts of the world. Yet all these will have unintended consequences overtime.

And as for the Japanese government’s 50 trillion yen (US $595 billion) monetary stimulus combined with 1 trillion yen ($12.3 billion) fiscal stimulus, as I previously wrote,
It has been said that desperate times calls for desperate measures, but such measures of desperation are likely to speed up the coming government induced train wreck for the Japanese.

Talk about doing the same thing over and over again and expecting different results and not learning from the lessons of history.

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