Markets surge again on Japan money printing

Tim Wallace
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ASIAN and European equities performed strongly yesterday as the impact of a huge new round of money printing in Japan continued to surge through global markets.

The Bank of Japan’s shock announcement that it would seek to almost double the monetary base to 270 trillion yen (£1.79 trillion) over less than two years boosted markets on Friday and is still having a positive effect on sentiment.

The huge new round of money printing pushed the yen down to a four-year low. It slid 1.41 per cent against the dollar and 1.48 per cent against the euro yesterday. Stocks on the Nikkei 225 rose 2.8 per cent and the FTSE 100 increased 0.34 per cent.

The new governor of the Bank of Japan, Haruhiko Kuroda, had been appointed explicitly to loosen monetary policy further, and the scale of the move means analysts expect sustained easing.

“We now expect the yen to weaken as far as 110 to the dollar by the end of the third quarter of this year and to 120 in 2014, based on the relative prospects for monetary policy in Japan and elsewhere,” said Capital Economics’ Julian Jessop.

He suspects the new round of quantitative easing may still not be enough to hit the Bank’s new two per cent inflation target.

“The commitment to do whatever it takes to end deflation would then simply increase the chances of further monetary easing on top of what has already been promised,” he said.