New approach of BoJ towards forex market interventions is described. Unintended consequences of new policy implementation are discussed. Alternative methods of lowering inflation at disposal of BoJ are considered; possible outcomes for different scenarios are outlined and their impact on JPY exchange rate is put forward.
For years now central bankers around the globe are trying to convince public that inflation is indispensable constituent of healthy economic growth and should be greeted with optimism as harbinger of coming prosperity. There is one caveat though they say, it should be rightly dosed at 2% annual rate; any readings below the desired level is deemed as counterproductive.
Considering relatively low levels of inflation in Japan over the last decades, at least according to government statistics, the aim of reaching “the target level” seems to be hard to achieve.
Considering that over the last decade inflation in Japan, at least according to government statistics, stayed at relatively low levels, the aim of reaching “the target value” might seem to be very hard to achieve.
Indeed, it is rather difficultto overcome deflationary forces in highly indebted econom…