Japan’s technology markets are set for a boost, after the Bank of Japan doubled its inflation target from 1% to 2% this week, and eased monetary policy, in a move that meets demands made by Prime Minister Shinzo Abe’s newly formed Government.
his move is a refreshing one, given that the Bank is fiercely protective of its independence, leading to fears that it could resist Abe’s requests, which, consequently, could have further undermined the Japanese economy.
Although many regard Japan as a technology powerhouse around the world, the strength of the Yen comparative to struggling currencies across Earth has meant that export costs have been crippling many industries. Technology developers and manufacturers have found themselves in the awkward position of having to produce more to meet global demand for products, while knowing that this will have a knock on effect on themselves, as their own expenditure increases.
In the short-term, the move is likely to providing a much welcome boost, with the economy receiving an impetus of billions of Yen.
This week’s measures from the Bank represent what many hope will be the first step to stabilising Japan’s economy in the long-term, which has suffered from consistent deflation patterns since the early 1990’s. In the short-term, the move is likely to providing a much welcome boost, with the economy receiving an impetus of billions of Yen.
Macquarie Group, Australia’s largest investment bank with several interests placed in Japan, was among many to praise the Bank of Japan. “For once, the Bank has been more aggressive than the market expected. The government is clearly forcing the pace of change, which is no bad thing,” commented Brian Redican.
“The Bank has talked about targeting inflation for years without any success, but these changes are more credible.”
Already, there is a feeling of positivity in Japan on the back of such comments coming from key players in other economies. While businesses in the country will be able to benefit from the measures, the real longer-term benefits will come when confidence fully returns and multi-nationals once again look to invest prolifically in Japan’s technology industry.
It remains to be seen whether the Bank’s decision to delay an asset-buying plan to 2014 will have an effect either way. While some analysts believe it was the right thing to do, others feel it betrays the lack of confidence that the Bank has in the Government, as well as the potential for Japanese businesses to recover in general.
The Japanese Stock Market briefly gained upon the Bank of Japan’s announcement, but had fallen by close of the day, ending 0.4% down.
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