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Japan's surprise financial "shock and awe"

Thursday, Apr 04, 2013 - 01:54

April 4 - New Bank of Japan governor Haruhiko Kuroda has surprised markets by announcing an unprecedented stimulus plan. Kirsty Basset reports.

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Japan would like more than anything to say "sayonara" to the deflation which has dogged its economy for almost two decades. And now a glimmer of hope - with new Bank of Japan Governor Kuroda announcing an aggressive strategy to turn the economy around by DOUBLING the country's monetary base to 270 trillion yen - pumping 1.4 trillion yen into the economy - in less than two years. The move, described by Kuroda as unprecedented, shocked markets and caught many analysts by surprise. HSBC FX strategy manager, Daragh Maher. (SOUNDBITE)(English) HSBC FX STRATEGY MANAGER, DARAGH MAHER SAYING: "It was impressive. We've become accustomed to the Bank of Japan underwhelming us. Got to admit, that's what we anticipated as well today. And when they've come in, they come in with some big steps, you know the monetary expansion is big." The yen plunged on the news, which will help Japanese exporters. But there are fears a surge of cheap yen could stoke a currency war. France is among countries concerned the move will boost the value of the euro and make euro zone exports more expensive. Reuters FX analyst Neil Kimberley. (SOUNDBITE)(English) REUTERS FX ANALYST NEIL KIMBERLEY SAYING: "Their neighbours in the area have turned FX manipulation in the area into an art form over the last 20 years. And Japan has stood back and done nothing, allowed the yen to strengthen. It's time for Japan to stand up and do what's good for Japan, and beggar the consequences." But not everyone is convinced the bold measures will reign in deflation. (SOUNDBITE)(English) HSBC FX STRATEGY MANAGER, DARAGH MAHER SAYING: "They've increased the chances they'll succeed. But I still think what we'll end up with in Japan is a stagflation type environment. Weaker yen, perhaps short term gets inflation higher but what you want is wages growth, real underlying demand. I'm not sure that this gets us there. I think that's where the skepticism will begin to emerge again in coming months." Along that vein, German Finance Minister Wolfgang Shaeuble has urged Japan to address structural problems, rather than relying on monetary stimulus alone.

Japan's surprise financial "shock and awe"

Thursday, Apr 04, 2013 - 01:54

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