In the last few months, the world has gone crazy for “Abenomics” – Japan’s hopeful escape route out of its two “lost decades.” It’s the aggressive monetary easing from the Bank of Japan that has produced the most significant reaction so far. The central bank has adopted a new inflation target of 2% to be achieved within two years, and to hit this target, the BoJ will double the size of the monetary base by the end of 2014, mainly through increased purchases of Japanese government bonds (JGB).
To put the BOJ’s quantitative easing in context: the policy measures will produce a massive expansion of the balance sheet to 60% of GDP by 2014. By contrast, the Fed’s balance sheet is unlikely to grow to more than 30% of GDP. Read more