BOJ: <I>Bonzi!</I>

The BOJ has announced its plan to double the monetary base of the country--adding $1.4 trillion--by the end of 2014 in an attempt to end the deflation plaguing the economy. The BOJ will do so mainly by buying more long-term government bonds raising the average remaining maturity of its holdings from about three years to seven years--keeping downward pressure on yields all along the curve.

Notice that no one is asking whether it makes sense to stop deflation. The BOJ’s theory, which is shared by Fed officials, is that a little bit of inflation is a good thing because it might stimulate demand as a result of buy-in-advance attitudes. Maybe so. More likely is that low inflation won’t have that impact, and it will certainly reduce the purchasing power of consumers.