The last few months have seen a dizzying amount of activity out of the Bank of Japan (BOJ), the island nation's central banking authority. After decades of anemic growth and piling soverign debt, government officials are attempting to kick-start the economy. However, Prime Minister Shinzo Abe and his BOJ counterpart, Haruhiko Kuroda, appear to be charting a confusing path that has caused a rising tide of market turmoil to surface. Efforts to encourage Japanese businesses to hire have yet to pay off, despite the central bank's unprecedented amount of quantitative easing in recent weeks.
Japan faces a unique monetary problem, which is interesting as the country has been examined as an economic basket case ever since it imploded financially in the late 80s and early 90s. Since then, successive governments have struggled to find a way to get the economy moving. This time around, officials have targeted bond yields to spur lending. Yet even with super-low borrowing costs, big companies in Japan remain wary about hiring until business conditions improve materially.
Adding to the market anxiety is the fact that some members of the Japanese government are reportedly sending mixed signals during public statements. In an age of hyper-fast finance, stock prices and bond yields have the propensity to spike or plunge even when an official is still giving a press conference. Some have attributed the severe volatility in Japanese investment circles to supposed contradictions between Prime Minister Abe's cabinet and members of the BOJ's governing board.
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