Post QE Era "Currency War 2" Opening

The BoJ unexpectedly expanded its quantitative and qualitative easing (QQE) scale to 80 trillion yen on Thursday. The Fed also reminded the ECB not to devalue the euro too much.

And these are probably just the beginning. We will see a new round of monetary policy competition in the future.

Global economic growth is still worrying, but the US economy is growing strongly.

Correspondingly, the Fed has ended QE, but the rest of the world's major central banks are still easing.

Under the background of dual differentiation, the monetary policy of the major central banks of the world has become more and more obvious, and the currency war is heating up.

The central bank launched the "first shot" Wall Street news report, the Bank of Japan announced on Thursday (31) earlier, will increase the annual monetary base monetary stimulus target to 80 trillion yen, after the target of 60-70 trillion yen.

Such unexpected and vigorous policies are totally out of market expectations. The yen has dropped sharply and the US dollar / yen has soared.

Up to 2 a.m. Beijing time on November 1st, the US dollar rose to 2.86% against the yen, at 112.11, a six year high.

In announcing the policy, Kuroda Higashihiko, governor of the Bank of Japan, also said, "if necessary, we will not hesitate to act again".

The Wall Street journal believes that the BoJ is launching a new massive easing.

Shocked by the market, central bank observers did not expect this move to show that Kuroda Higashihiko, the governor of the Bank of Japan, relied on subversive expectations and unexpected effects.

The Federal Reserve: the ECB, you shouldn't go too far, according to the international market news agency quoted the ECB sources, the 3 trillion euro's balance sheet objective is not very realistic. The Fed has noticed the euro's decline and reminds the ECB not to go too far.

Some analysts speculate that the US Treasury Secretary, Jack Lew, may soon be able to call Japan "manipulating the currency" (the euro zone may also be unable to escape blame), especially the German finance minister, CHO Ebler, who reminded people on Thursday that "printing money is not conducive to growth".

The situation in the eurozone is not optimistic, and low inflation is showing up.

The euro area inflation rate was only 0.3% in September, far below the target of 2%.

Germany has recently reduced its economic growth forecast from 1.8% to 1.2% in 2014.

Data from Hungary and Switzerland show that its economy has begun to sink into deflation.

"Currency war 2" is imminent. HSBC analyst Paul Mackel and Dominic Bunning said in a report this Thursday

It announced that it would withdraw from the QE as scheduled, and that the monetary policy statement was biased towards hawks, while Japan's central bank announced unexpectedly that it would expand the scale of easing.

The United States has maintained a strong momentum in recent economic data, and the Federal Reserve has pulled out of the QE on schedule at this week's monetary policy meeting. The market has raised interest rates earlier on the Federal Reserve. There seems to be nothing stopping the Fed's normalization of monetary policy.

In the next few months, the European Central Bank may also take further easing. The central bank's monetary policy deviates from the pattern seems to be more obvious, and the atmosphere of currency war is heating up.

David Wessel, head of fiscal and monetary policy at Brookings Institution, also said that with the aggressive easing policy of the Bank of Japan and the European Central Bank, countries are scrambling to depreciate their currencies to stimulate exports, and the global "currency war is about to break out."