$1.4 Trillion Stimulus Plan Promised By BOJ Uses Quantitative Easing

$1.4 Trillion Stimulus Plan Promised By BOJ Uses Quantitative Easing

A $1.4 trillion stimulus plan is being promised by the Bank Of Japan (BOJ), the Japanese equivalent of the United States Federal Reserve.

As previously reported by The Inquisitr, the United States Federal Reserve’s economic stimulus plan is focused on quantitative easing. Quantitative easing is when a government’s central bank purchases financial assets from commercial banks and other private institutions, thus creating money. The US Federal Reserve has used this idea multiple times, with the last being QE3, which focused on buying up billions in real estate.

The Bank of Japan’s $1.4 trillion stimulus plan would involve open-ended asset buying and they expect the monetary based to double to 270 trillion yen, or $2.9 trillion, by 2014. Since Japan’s economy is about one-third the size of the US economy, the $1.4 trillion stimulus plan is seen as a very bold move.

The goal in doubling the money supply in Japan is to achieve a two percent inflation target within two years. The idea is that with more money available corporations and consumers would begin spending more.

Governor Haruhiko Kuroda says the $1.4 trillion stimulus plan by the Bank of Japan should boost growth and lift inflation expectations:

“This is an unprecedented degree of monetary easing. We took all available steps we can think of. I’m confident that all necessary measures to achieve 2 percent inflation in two years were taken today.”

Investors reacted to the $1.4 trillion stimulus plan with relief, with the Japanese yen, which was trading at about 92.8 yen per US dollar, dropping to about 94.95 yen per dollar.

Do you think the $1.4 trillion stimulus plan from the Bank Of Japan is a good idea?