“The Bank of Japan's original plan was that the QE programme would last just two years but last November Governor Haruhiko Kuroda actually increased the size of the scheme, which now appears open-ended,” says Russ Mould, AJ Bell Investment Director. “Japan has succeeded in driving down its currency in a bid to boost exports but its 2% inflation target and improved economic momentum remain elusive. The prime beneficiaries of QE in Japan have been investors and this rather mirrors the results of similar policies in the US, UK and Europe, where the recovery remains sluggish at best and inflation can be seen most clearly in asset prices, as stock and bond prices have roared higher there, too.”
Since Japan's QE launch in April 2013, the Nikkei 225 benchmark has surged 52% to 19,207, although the yen's decline means the dollar-priced return has been 23%.
This compares to dollar-denominated gains of 34% in America's S&P 500, 15% in the Euro STOXX 600 and 6% in the FTSE 100.
Notes for Editors
- Bank of Japan Governor Haruhiko Kuroda announced Japan would (re)initiate Quantitative Easing on 4 April 2013. The original plan was to double the monetary base through buying bonds up to a value of between ¥60 billion and ¥70 billion a year over a two-year period
- The programme was expanded to ¥80 billion a year in November 2014 as the Bank of Japan pledged to expand its balance sheet by some 15% a year.
- This monetary expansion is one part of the “Three Arrows” reform programme launched by Prime Minister Shinzō Abe after his initial election victory of December 2012. The other two are fiscal stimulus and social structural reforms.
- Japan previously tried QE and a zero-interest rate policy (ZIRP) between 2001 and 2006. The Nikkei 225 rallied by 140% to a peak of 18,262 but rolled over once the programme was halted. The economy also stalled, hampered by the outbreak of the Great Financial Crisis in 2007.