Tuesday, December 1, 2009

The Debts of the Lenders: Japan Embarks on Another Round of Quantitative Easing

Dumb and dumber (US and Japan) compete for carry trade flows. Now, the BOJ, pioneers of quantitative easing, have taken a lesson from Bailout Bernanke by accepting "a wide range of collateral" in exchange for ultra cheap money. Nikkei bulls and export starved manufacturers have gotten the green light to go up another few hundred points on the stock index.

But, in the process, each country is debasing their currency and accruing billions (trillions, gazillions, who knows any more?) in debt for future generations to pay off.

TOKYO (Dow Jones)--Japan's central bank unveiled a surprise monetary easing effort Tuesday that could inject up to $115.7 billion into an economy facing deflation and a soaring currency, but it failed to impress financial markets or economists eager for bolder action.

The Bank of Japan's move, which followed increasing political pressure from Japan's new government, underscores the pessimism surrounding the Japanese economy. Japan has posted two straight quarters of economic growth and seen a resurgence in demand for its exports. But declining consumer prices and the yen's strength against the dollar have raised concerns that Japan could slip back into recession.

At an emergency meeting Tuesday, the BOJ adopted a new lending program to provide 10 trillion yen worth of funds for three months at a rock-bottom rate of 0.1%, taking in exchange a wide range of collateral from government bonds to deeds on loans. But the bank stopped short of lowering its key policy rates, also at a low 0.1%.

Source: DJ Newswire
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