Japan has become a testing ground for economic theories about how to revive a flagging economy through large-scale central bank and government stimulus. Quantitative and qualitative monetary easing (QQE) programme launched by the BoJ has been done at a scale not seen elsewhere in the world to date, with government bond purchases increased from ¥50 trillion a month to ¥80 trillion since 2013 (or around 1% of GDP). After years of stagnation, the Japanese economy is beginning to show signs of life. Yet its impact on headline inflation expectations in the country has so far been muted. Where Abenomics has had an impact is on the cost of capital, with interest rates in Japan falling significantly in response to the brute force purchases by the central bank. However, this has not led to a significant pick-up in bank lending to the real economy. To read the full article (VIEW LINK)
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