Bank of Japan Governor Masaaki Shirakawa may not be alone for long in taking action and Daiwa Institute of Research argues he’s now engaged in a “vicious spiral” of monetary easing with the Fed as both compete to bolster their economies.
“The BOJ’s next moves will depend on the Fed,” said Maiko Noguchi, an economist at Daiwa in Tokyo. “The bank will have no choice but steadily take easing measures.”
Fed Chairman Ben S. Bernanke and his colleagues have signaled they may announce the purchase of more Treasuries as soon as their next policy meeting on Nov. 2-3 in an effort to boost growth and reduce an unemployment rate stuck near 10 percent for the past year.
“The irony is that the Fed is creating all this liquidity with the hope that it will revive the U.S. economy. It is doing nothing for the U.S. economy and causing chaos for the rest of the world,” Joseph Stiglitz, a Nobel Prize- winning professor at New York’s Columbia University, said today in New York.
Bernanke said on Oct. 4 that the Fed had aided the economy by buying $1.75 trillion of mortgage debt and Treasuries from August 2008 through March 2010. Pacific Investment Management Co. says a new round of quantitative easing, the policy of creating money by enlarging the central bank’s balance sheet, is “likely.”
“The bottom line for the U.S. is a growth trajectory so slow you’d nearly call it stalled,” Paul McCulley, a portfolio investor at Pacific Investment Management Co., wrote on the company’s website this week.
Steven Englander, New York-based head of Group of 10 currency strategy at Citigroup Inc., said he anticipates the dollar will continue to fall, with the euro likely to pass through $1.40 from $1.37 yesterday. The dollar has already dropped 7 percent against the euro since the start of September.