The Bank of Japan’s has shocked markets with a radical stimulus plan that includes doubling the size of its government bond holdings within two years.
At new Governor Haruhiko Kuroda’s first policy-setting meeting, the bank’s balance sheet target was shifted in an attempt to end nearly two decades of deflation and minimal growth in Japan.
Deflation leads to people putting off buying things as they believe they will get cheaper.
The scope of the changes Kuroda pushed through, and the fact he secured unanimous central bank board support for them, drove the value of the yen down sharply along with Japan’s borrow costs.
The decision marks a return to the BOJ’s five-year quantitative easing policy that ended in 2006, when it flooded markets with cash targeting excess reserves that financial institutions parked with the central bank.
Despite the market excitement, some analysts were sceptical whether pumping money into markets already awash with excess funds was a solution to end deflation.