Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Jason Stipp and Jeremy Glaser | 04-05-2013 10:00 AM

The Friday Five

Five stats from the market and the stories behind them. This week: Japan's 2% target, the 88,000-job disappointment, and the 20 million Facebook phones that will never be.

Jason Stipp: I’m Jason Stipp for Morningstar, and welcome to The Friday Five: five stats from the market and the stories behind them. Joining me, as always, with the numbers is Morningstar markets editor Jeremy Glaser. Jeremy, thanks for being here.

Jeremy Glaser: Glad to be here.

Stipp: So what do you have for The Friday Five this week?

Glaser: We're going to look at 2%, 88,000, minus 50%, 20 million, and finally, 45%.

Stipp: 2% is the inflation rate that Japan is hoping to target. They are taking some pretty extraordinary measures to do that. What's your take?

Glaser: This really is an incredibly aggressive program that the Bank of Japan is going to be embarking on. Before we knew that they were going to start targeting a 2% inflation rate, that already helped the Japanese stock market a little bit. That's being driven by the Prime Minister Abe, who is coming back into power. He is bringing with him a new central bank governor, who has a lot more unconventional ideas than the previous governor had. After he led his first meeting in the Central Bank, we got some more details on how they are going to hit that 2% target.

They are going to do it by doubling the monetary base by 2015 to get to that level, and to get rid of the deflation that has really plagued the country for decades now. They are going to be buying about 1% worth of GDP of Japanese government bonds, according to Barclays, every single month. That compares to about 0.5% that the Federal Reserve is buying of U.S. government bonds, to give you a sense of the scale of this program versus QE3.

So with this massive amount of new money being printed, the question is, will it actually get that inflationary effect? And we just don't know yet. If this ends up just being held in banks, and it doesn't really get out into the economy, there's no demand for that money, we might not see that inflation pick up exactly how they hope it's going to.

And it's going be really a lesson in psychology. Can the bank convince ordinary Japanese that there is going to be inflation? That they do need to spend now, or they're going to see their purchasing power either really diminish over time, and get their private spending up. Can it overcome some of the demographic and other issues that Japan is having right now? We just don't know, but this is really an aggressive plan. It will be interesting to watch to see how effective it is.

Stipp: Back here home, despite some continued Fed stimulus measures, we only got 88,000 jobs added to the economy in March--definitely a disappointing report. What's your take?

Read Full Transcript

{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article