Here’s an interesting article from the Financial Times, with some food for thought:
If Spanish five-year bond yields can halve in less than two years to fall below those of equivalent US paper; if Italian 10-year bond yields can trade at an all-time low of 3.25 per cent; and if Greece (which some investors would argue is still technically insolvent) can borrow for five years with the promise of a 5 per cent coupon, then maybe thinking the unthinkable about Japan is not so absurd. If Spanish and Italian bonds can escape the clutches of the eurosceptic bears, perhaps Japan can wriggle free from deflation.
It argues that the BoJ has gone far beyond Draghi-style promises:
- it has presided over a 25 per cent depreciation of the yen during the past 18 months;
- it is in the process of doubling the money base in just two years;
- and it is actively committed to 2 per cent inflation
It goes on:
- If the ECB did this, the markets would regard it as a major paradigm shift; but because Japan has done it, somehow it does not “count”.
- The extent of the regime shift at the world’s third largest central bank continues to be underestimated.
And says:
- The BoJ wants to kick-start a domestic credit cycle
Well worth a read: Sceptics underestimate Japan’s policy shift
