Japan’s central bankers are locked in the same vicious cycle as the rest of the world. The US in isolation could easily have raised rates by now, but the rest of the world is not ready and is now big enough to give the Fed cause to pause. However, unwilling to relinquish their grip on America’s coat tails, central banks outside the US have responded to Fed hesitation by lowering the bar, pushing interest rates below zero and devaluing currencies. The result is a race to the bottom.
Japan’s QE is already huge and expanding the programme would hasten the dash towards the limits of QE. Even without expansion, Japan will begin facing barriers by the end of 2016. Click below to find out more about these limits and barriers.