Starting with April this year the QQE program (quantitative and qualitative monetary easing) has been launched. Through this program, the Government is increasing annually the monetary basis by 60-70 trillion yen. The quantitative aspect is determined by the great amount of JGBs bought monthly while the qualitative aspect is represented by increasing average remaining maturity of the Bank’s JGB purchases to about 7 years. Positive effects have been observed in terms of stocks (whose prices rose), a flat long-term interest rates, a more favorable consumer’s sentiment and increased expectations for inflation.
The pace of growth is expected to evolve as: 2.8% for fiscal 2013, 1.3% for fiscal 2014, and 1.5% for fiscal 2015. The only disturbing factors are the two scheduled consumption tax hikes (this scenario is valid if the global economic situation remains stable otherwise, the strongest obstacle remains the anxious global economic evolution). An increase in the sales tax in considered to be mandatory in order to sustain the “repair” rhythm of the country’s finances.
In the meantime, Japanese officials are visiting China on the 29th and 30th of July in an attempt to build a mutually beneficial relationship and to solve the territorial disputes.