Japan: new government, new economy?

Japan - new government, new economy

Japan – new government, new economy

As expected, the Liberal Democratic Party led by Shinzo Abe won the parliamentary Japanese elections.

The Yen continued weakening against the US dollar last week, probably because Abe will have a free hand to implement a more expansionary fiscal policy, and will attempt to force an implementation of a more expansionary monetary policy on the central bank, thanks to the fact that the coalition parties achieved a two-thirds majority.

Following the election victory, Abe announced the immediate increase of national expenditure in order to stimulate the Japanese economy.
It seems like the Japanese central bank began to surrender to the new prime minister’s demands.

In the last interest rate decision, the central bank agreed on increasing the volume of the quantitative easing program, although in a relatively modest way compared with the new prime minister’s target.

The program had been expanded by 10 trillion yen in the coming year.

In addition, the bank announced that in the next interest rate decision the implications of setting a new inflation target will be discussed.

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