The Business Times

In Japan, QE faces supply side problems

Published Tue, Jul 1, 2014 · 10:00 PM
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QUANTITATIVE easing (QE) which usually involves the buying of government bonds and other financial assets on a major scale by a nation's central bank in order to pump money into the economy has worked quite well in restoring growth in the United States.

The eurozone has been unable to follow the Federal Reserve's form of QE to boost its own growth because it does not have a unified government bond market. But Japan, which does have a substantial financial asset market, has jumped right in with its own mega QE programme.

The Bank of Japan (BOJ) is now discovering to its cost, however, that one man's medicine can be another man's poison where QE is concerned and that the success or otherwise of QE remedies depends upon the nature of the ailment which they are intended to cure.

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