Japan: Firing the Third Arrow

Japanese Prime Minister Shinzo Abe’s ability to implement his agenda is politically unfettered. But can he deliver, and will his policies work? We remain cautiously optimistic.

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ECB’s Attitude to Portugal Raises Questions about Bond-Purchase Programme

Political upheaval in Portugal has thrown the spotlight on the European Central Bank’s (ECB’s) bond-purchase programme, known as Outright Monetary Transactions (OMTs). Many are asking whether the ECB is ready to support the market if yields rise further. And if not, why not?

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Is Inflation Really Gone Forever?

Recent movements in asset prices suggest that markets have forsaken any possibility of an inflation outbreak in the next decade. We believe that view is far too sanguine.

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For Abenomics, the Hard Part Is Still to Come

Prime Minister Shinzo Abe’s “Abenomics” program, designed to revive Japan’s economy, was a big success in its first five months, easily surpassing low expectations. But it’s drifted off course since it began, and the going is sure to get tougher from here. Still, it’s too early to write off this policy experiment.

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An Odd Decoupling in the
US Private Service Sector

First-quarter US economic growth data were revised downward today by the Bureau of Economic Analysis (BEA), based on new information suggesting a slower pace of consumer spending on services. The change draws attention to an anomaly between strong private service sector job growth and weak private service sector output.

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Will Carney Light Fireworks at Bank of England?

On July 1, former Bank of Canada governor Mark Carney will replace Sir Mervyn King as governor of the Bank of England. For many observers, this will herald a new dawn in the conduct of British monetary policy. We agree, but think the process will be more evolutionary than revolutionary.

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Just a Sneeze—or Dutch Disease?

The changing dynamics of the commodity boom imply leaner times ahead for producer countries. Investors, however, should be wary of tarring them all with the same brush, as we believe such countries will offer different risks and opportunities as the cycle unwinds.

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Should Euro-Area Exporters Worry About a Weaker Yen?

Darren Williams (pictured) and Guy Bruten As the yen continues to plummet, exporters around the world are growing concerned that Japanese rivals may gain a competitive advantage. But our analysis suggests that the euro-area economy may not be quite as vulnerable as widely perceived. 

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Rising Asset Prices Sharpen US Policy Challenge

As the housing market wakes up and the stock market rallies, strong gains in asset prices are improving US household wealth and helping to reduce the federal deficit. This is a great boost for confidence, but it also sharpens the challenge facing US fiscal and monetary authorities.

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Likely Rate Cut from the European Central Bank Will Be No Magic Wand

Disappointing April data suggest that the ECB is set to cut the refinancing rate at Thursday’s Council meeting. This is likely to have limited economic impact but  could encourage expectations of more creative policy action later, helping to take some upward pressure off the euro.

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