Japan: The quest for growth and inflationNov 1, 2015

Key Points

In 2012, the administration of Prime Minister Shinzo Abe launched a comprehensive policy dubbed “Abenomics,” articulated in three “arrows”: The first arrow targets a far more extensive and aggressive monetary easing than previous monetary expansions. With this new quantitative and qualitative easing (QQE) program, the Bank of Japan (BOJ) has more than doubled the monetary base since the start of 2013, it has significantly extended the residual maturity of the Japanese government bonds (JGBs) in its portfolio, and it has undertaken important direct purchases of riskier assets. This strategy has triggered important portfolio reallocations in Japanese financial institutions and has sent an unambiguous signal of the BOJ’s determination to maintain a powerful monetary stimulus until inflation rises to about 2% on a sustainable basis.