If you thought Bernanke’s buying of U.S. government bonds was hardcore monetary stimulus, then check out Japanese central bank governor Masaaki Shirakawa.Today’s he’s provided further detail on Japanese central bank plans to buy not just government bonds, but lower-rated corporate bonds, ETFs, and even Japanese real estate investment trusts (REITs).
The program “suggests that we stand ready to counter downside risks for the economy and that can provide relief to financial markets and have a positive effect on corporate sentiment,” Shirakawa said at an economic forum in Tokyo today. “We need to continue to take appropriate policy action.”
The bank will buy 3.5 trillion yen in government debt, 1 trillion yen in corporate debt, 450 billion yen in exchange- traded funds and 50 billion yen in J-REITs. It plans to buy lower-rated corporate debt than its purchases in 2009, a step to make it easier for companies to borrow funds.
Japan’s buying program is only $62 billion at this stage, but it can A) become larger if Japan’s central bank deems it necessary and B) will act on markets much smaller than the U.S. government bond market. What Bernanke is doing is experimental for the U.S., but Japan remains clearly on the experimental frontier when it comes to monetary stimulus. Though we’re not sure it’s something to be proud of.
The yen has weakened slightly since Bernanke’s announcement, so it seems as though Japan is indeed winning the race to destroy currency credibility.