Quantitative Easing in Japan ! A blessing or curse for Asia?

Appreciate or criticize? Economists worldwide is confused when Japan’s 20 year old monetary policy was replaced by quantitative easing. The decision taken by Mr. Haruhiko Kudera , the governor of the  Bank of Japan has brought mixed reaction throughout the world . This decision has been quiet revolutionary since household savings in the country was in a deep slumber all these years.

Central Bank will be buying 70% of government’s current Japanese Government Bond issuance & the rate of investor money will be rising to huge levels.

Nobody knows where all that money will go!! Not only Japan, but the whole of Asia might benefit out of this. Quantitative Easing has been applied in  the US and other European countries in the past and Asia was a beneficiary.

Some economists think that this sudden flow of money may not help the Asian credit segment. Southeast Asia has witnessed a fresh level of high yielding bond issuance along with Chinese property issuers. The property bubble in China is creating a record number of bonds and the developers are taking additional loans. But no one is sure about their ability to repay all these loans.

It seems like Japanese investors are not bothered about the background of the borrowers, they simply want the returns. Bank of Japan’s quantity easing strategy will generate so much money, that they are likely to bring more volatility and inflating yields.

Will this be good for Asia? Will Asia be able to handle the related market swings which can impact the entire region? Will this make or break the entire Asian credit market?

These questions are to be answered yet.