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Japan, the world's second largest economy is facing a sharp downturn. To try and stimulate its economy, Japan is using the financial tools used by the US and UK. The Bank of Japan( BoJ) said that it is increasing its purchases of JGB's (Japanese Government Bonds) from y 1,400 billion to y 1,800 billion per month. A central bank buying its bonds has the effect of creating new money that will flow into the economy. Japan is careful to say that this is not "quantitive easing" or just printing money, but in reality it will have the same effect.
In other measures the BoJ would provide y 1,000 billion in subordinated loans to large commercial banks to keep credit flowing. In addition, the BoJ has been buying corporate debt to insure that companies will have access to credit.
So now if we look at the world's largest economies, we find that they pretty much are using the same financial tools. The next few months should determine if these attempts to stimulate growth will actually work or if the damage and capital losses have been too great to turn our economies around.
Do you believe that these financial measures will work?
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Reader Comments (Page 1 of 1)
3-19-2009 @ 6:29PM
sgentilejr said...
There is a far simpler way to keep the economy going with Funny Money. I call it "Just Add a Zero". All that has to be done is allow everyone to just add a Zero onto the currency they have in their pockets so they can pay their bills and debts. Add a Zero onto a $5.00 bill and you now have $50 to spend.It sounds crazy, but it is no more crazy than the Fed borrowing more and more money and selling the notes to the Federal Reserve System which in reality does not have the money to actually purchase anything. It is just smoke and mirrors operation in transferring the debts from one entity to another, none of which actually have any money. Face reality, The Emperor has No Clothes.