News out of Japan – the government has just announced a 915 Billion Yen stimulus package.
The package is aimed at jobs, housing and domestic consumption. Finally after two decades of frantically and fruitlessly pushing the button marked, ‘exports’ it has dawned on somebody over there that nurturing domestic consumption might help a bit. Along with the stimulus announcement the government also said they hoped the Bank of Japan would do its part. By which they mean some more printing (QE).
So bingo. When they were all meeting at Jackson Hole I said there would be no exit from the print and bail policy and that Japan would be the first to print and stimulate. And today they are.
What has held them back till now, apart from domestic political instability, has been the fact that the US has been putting pressure of Japan NOT to do anything to weaken the Yen. The US is desperate for its own currency to weaken a little. China and Europe already have weaker currencies. Now if the government can get the BoJ to do its bit, Japan will break ranks with the US too.
The report also said that while the package of measure and the amount was all ready to go, the government had not set a date. It would use the package as needed. I read this as the Japanese trying to get the same effect as Europe got from its stimulus package. Europe announced it, and the markets felt all warm and re-assured, even though the money has hardly been touched yet.
Japan is hoping they will get the same effect. I don’t think they will. They will certainly get a short term effect but it will wear off quite quickly and they will, I think, have to start the actual spending soon.
So now the question is who will be forced to go next, Europe because of its interlocked bank and sovereign woes, or the US?