Policy makers elsewhere in the world, lacking the magnitude of the slowdown or deflation in the U.S., Japan and Europe, have been more reluctant to expand easing. China has left interest rates and lenders’ reserve requirements unchanged since July, Canada has kept its key borrowing cost at 1% since 2010 and Brazil’s benchmark Selic has remained at a record low of 7.25% since October.
Yi Gang, head of China’s foreign-exchange regulator, said in January that he’s concerned about the potential fallout from expanded asset-purchase programs and near-zero interest rates in the world’s advanced economies. South Korea Finance Minister Hyun Oh Seok said last month that the yen is “flashing a red light” for his nation’s exports.
Japan’s latest action “won’t boost global stocks, though it’s definitely helping Japanese ones,” said David Poh, Singapore-based regional head of portfolio management solutions at Societe Generale Private Banking, which oversaw more than $113.8 billion of assets as of Sept. 30. The effects on trade are “going to be very detrimental for Koreans and Chinese.”
Fed Governor Jeremy Stein has warned that some credit markets, such as corporate debt, are showing signs of potentially excessive risk-taking. In a speech in St. Louis on Feb. 7, Stein cited leveraged loans and junk bonds as areas that have been “very robust of late.”
In Japan, “it’s very difficult to control the effects,” Hoogduin said. “At the same time it will be politically very difficult to put a brake on this process. The policy can derail and can lead to distortions in the Japanese economy.”
For now, the BOJ has joined with counterparts to create a “typhoon of cash globally” that’s likely to aid expansion around the world, said Jason Brady, a fund manager who helps oversee about $84 billion in assets at Thornburg Investment Management Inc. in Santa Fe, New Mexico.
“Central banks everywhere are doing the exact same thing,” Brady said in a Bloomberg Television interview with Susan Li. “You have to believe that all of this printing or all of this stimulus is actually going to lead to sustainable economic growth.”