The profound shift in economic strategy by the world’s top creditor nation could prove a powerful tonic for the global economy, with stimulus leaking into bourses and bond markets - a variant of the "carry trade" earlier this decade but potentially on a larger scale.......more
"It is tremendously important for global growth, and markets are starting to take note," said Lars Christensen from Danske Bank.
Mr Abe’s Liberal Democratic Party (LDP) won a landslide victory on Sunday, securing a two-thirds "super-majority" in the Diet with allies that can override senate vetoes.
Armed with a crushing mandate, Mr Abe said he would "set a policy accord" with the Bank of Japan for a mandatory inflation target of 2pc, backed by "unlimited" monetary stimulus.
Opinion is split over the wisdom of ultra-loose money. Although Japan is trapped in chronic deflation, it is a stable - almost comfortable - equilibrium. The "real" value of savings is rising, in stark contrast to the West.
Stephen Jen from SLJ Macro Partners said the Bank of Japan is right to fret that a return to inflation could set off a spike in debt costs and a flight from Japanese government bonds (JGBs).
"Any meaningful sell-off in the JGBs could trigger a serious problem in Japan’s banking system. The holdings of JGBs by Japanese banks account for 900pc of their Tier I capital," he said. Better the Devil you know.