Warnings that Kuroda's Japanese QE stimulus may backfire

(Pictured: Bank of Japan governor Haruhiko Kuroda, source: Reuters)

Many voices now warn that Japan's unprecedented stimulus could come at a high cost. The radical moves taken by new Bank of Japan governor Haruhiko Kuroda may yet backfire. Our economics reporter Ben Southwood:

Hiroaki Muto, economist at Sumitomo Mitsui Asset Management said the policy stunk of past failures: “It’s as if we’ve gone back to the quantitative easing of the 2000s. Targeting the monetary base will lead to a huge increase in current account balances that banks keep at the BoJ, but I’m not sure if this money will move through the economy.”

And Charles Dumas at Lombard Street Research said Shinzo Abe had completely ignored the supply-side of the economy. Dumas said that without reform to the country’s “feather-bedded” large firms, any recovery would be short-lived.

(Full article)

Billionaire investor George Soros told CNBC that Japan's radical action is dangerous:

What Japan is doing is actually quite dangerous because they are doing it after 25 years of just simply accumulating deficits and not getting the economy going.

So if what they are doing gets something started, they may not be able to stop it. If the yen starts to fall, which it has done, and people in Japan realize that it is liable to continue, and want to put their money abroad, then the fall may become like an avalanche.

Japan is trying to escape after 25 years of slow death, from a policy that Europe has just now adopted. So they are moving in opposite directions. Japan is trying to escape and Europe is just starting.


Japanese Government Yield Curve (now vs then):twitpic.com/ch2uc6

— Michael McDonough (@M_McDonough) April 5, 2013