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17 Apr 2013
Forex Flash: BOJ to double monetary base in two years - Nomura
FXstreet.com (Barcelona) - Richard Koo, Chief economist at the Nomura Research Institute notes that the BoJ is set to double the monetary base in two years.
He begins by commenting that the newly announced easing programme, which seeks to double the monetary base in two years’ time, appears at first glance to be very aggressive. He sees that Japan already has a much larger monetary base (relative to GDP) than western economies, and it comes as little surprise that overseas analysts were shocked to hear it would be doubled again. However, he adds, “The relationship between base money and GDP depends to a great extent on (1) the economy’s reliance on cash and (2) whether individuals and businesses prefer to place their savings in bank deposits or invest them in other financial assets, such as stocks, or real assets.”
He begins by commenting that the newly announced easing programme, which seeks to double the monetary base in two years’ time, appears at first glance to be very aggressive. He sees that Japan already has a much larger monetary base (relative to GDP) than western economies, and it comes as little surprise that overseas analysts were shocked to hear it would be doubled again. However, he adds, “The relationship between base money and GDP depends to a great extent on (1) the economy’s reliance on cash and (2) whether individuals and businesses prefer to place their savings in bank deposits or invest them in other financial assets, such as stocks, or real assets.”