BoJ to pump $1.4 trillion in unprecedented stimulus move

The Bank of Japan unleashed the world’s most intense burst of monetary stimulus today, promising to inject about $1.4 trillion into the economy in less than two years, a radical gamble that sent the yen reeling and bond yields to new lows.

The Bank of Japan unleashed the world’s most intense burst of monetary stimulus on Thursday, promising to inject about $1.4 trillion into the economy in less than two years, a radical gamble that sent the yen reeling and bond yields to new lows.

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New governor Haruhiko Kuroda committed the BOJ to open-ended asset buying and said the monetary base would nearly double to 270 trillion yen ($2.9 trillion) by the end of 2014 in a shock therapy to end two decades of stagnation.

The US Fed may buy more debt under its quantitative easing, but with the Japanese economy about one-third of the size of the US, the scope of Kuroda’s “quantitative and qualitative monetary easing” is unmatched.

“This is an unprecedented degree of monetary easing,” a smiling Kuroda told a news conference. “We took all available steps we can think of. I'm confident that all necessary measures to achieve 2% inflation in two years were taken today.”

The move knocked the 10-year bond yield to a record low, and nudged Tokyo share prices just shy of a 4-1/2 year closing high.

“The result is nothing short of regime change,” HSBC’s Japan economist Izumi Devalier said in a report. “The BOJ has now made a much firmer commitment to achieving its 2% inflation goal, and has demonstrated that it will do anything short of foreign-bond buying to achieve this goal.”