On October 18, 2013, the deputy governor of the Bank of Japan (BOJ), Kikuo Iwata, gave a speech that went into great detail about the new quantitative and qualitative monetary easing (“QQE”) program that the BOJ introduced in April of this year. This speech provided some great insight into the BOJ’s thinking.
The BOJ is on track to be the most aggressive central bank in the world in its battle against the deflationary forces that have gripped Japan’s economy for the last 15 years. The new QQE program is starting to impact Japan’s economy measured by GDP, interest rates, inflation expectations, currency value against the U.S. dollar and equity markets1 —and it’s all going in the direction the BOJ desires. Let’s review key elements from Iwata’s speech:
On April 4, the BOJ decided to embark on its QQE program for “as long as it is necessary”2 to attain its 2% inflation target. The key words are “as long as it is necessary.” There is no sense of potential failure in the language coming from the BOJ—it will continue to hold to its policies to achieve these goals.