Fed's Yellen supports BoJ stimulus

While Janet Yellen refrained from making any bold statements during her first speech as the Chairman of the Federal Reserve, she backed the unprecedented stimulus programme from the Bank of Japan, saying it is "natural and logical" to make efforts to end 20 years of deflation and weak growth. She also claimed that stronger Japan's economy will be beneficial for its neighbouring countries and the global economy. These comments, however, were expected by markets and Japanese policymakers, who are even sure that weak Yen will not be a topic for discussion during the G-20 meeting in Sydney later this month. 

It is not a question that Shinzo Abe's policies are working and having positive effect on the world's third largest economy, however, the only question now is whether there will be more easing from the BoJ ahead of the April's tax hike? Some suggest that the announcement of the tapering from the Fed will be enough to push the Yen lower, however, others believe that additional stimulus will be required. A sharp 18% drop of the Yen is a worrisome sign for the BoJ, as companies are paying more bills overseas rather than they can earn abroad. And the largest trade deficit even under the current statistical format dating back to 1979 is definitely an alarming sign for the BoJ.