The Rattled BOJ Rightly Responds

The Rattled BOJ Rightly Responds. In a narrow majority decision, the BOJ - clearly rattled by the faltering economic recovery associated with April's consumption tax hike - voted to accelerate growth in the monetary base by no less than 20% pa and scale up its purchases of JGBs by around 60% pa. The expansion of its QE program should be welcomed by investors considering the unambiguous success that more aggressive conduct of monetary policy has had since the inception of Abenomics in: ending deflation, boosting inflation expectations, underpinning yen weakness, raising the level of nominal GDP, and boosting the stock market primarily through upgrades to forecasts of corporate sector profitability. The BOJ's announcement is a timely reminder that it remains committed to achieving its price stability target of 2% pa, that global liquidity will continue to be abundant and that the yield trade has not yet run its full course. (VIEW LINK)