Worth watching: Japan’s new Prime Minister Shinzo Abe is launching a bold experiment: a triple attack on economic stagnation with fiscal, monetary, and exchange stimulus.
He vows to devalue the Yen (which has fallen since his election), to launch a fiscal stimulus (worth 4% of GDP), and to force the BoJ to loosen monetary policy with a goal of 2% inflation.
Will this mean the BoJ is the first major central bank to effectively loses its independence? Will it trigger a crisis of confidence in Japan? Will it initiate competitive devaluations? Most importantly, will it work? Others will have to watch carefully.