Bank of Japan Makes Markets Soar

Bank of Japan Makes Markets Soar

Surprise stimuli plans announced by the Bank of Japan (BoJ) has caused Japanese led Asian shares to soar.

The unexpected decision from the bank to ease their monetary policy on worries was due to low oil prices and concerns over it affecting consumer prices, as a result the Nikkei 225 index increased 4.8% following the news.

The bank made the decision to increase the pace it expands money supply rom 70-70 trillion yen to 80 trillion yen (£454bn) a year. By mid-afternoon the index reached a 7 year high rising more than 5%.  The increase in money supply is 14.3%.  Does this mean that its share values will move the same over the next year?

Reports from Japan all show a weaking economy, an increase in unemployment and eased/reducing consumer inflation for a second month, leading to many expecting the BoJ to keep on track with its newly announced stimulus.

Comment

The size of the stimulus package is very, very big.  We suggest that inflation we soon be a new thing in Japan, an economy that has been deflationary in nature for over a decade.  We expect markets to rise, but it may soon lead us to suggest to clients that are exposed to far eastern markets to lock in profits if we issue a 'red' investment alert to come out.

Add to this plans in Europe, upon the agreement of the Germans, may move markets to be much more bouyant over the coming few months. The Uk has frozen its quantitaive easing and the US is now withdrawing theirs.  So is now the time to invest in Europe and the Far East.  We'll keep you updated.