Japan announces "quantitative and qualitative easing"

¥135trn of government bonds will be bought by the central bank.

The Bank of Japan has announced it is to carry out "quantitative and qualitative easing" in an effort to return inflation to its target rate of 2 per cent in "about two years". In a statement, the bank's incoming governor has said:

In order to do so, it will enter a new phase of monetary easing both in terms of quantity and quality. It will double the monetary base and the amounts outstanding of Japanese government bonds (JGBs) as well as exchange-traded funds (ETFs) in two years, and more than double the average remaining maturity of JGB purchases.

The scale of the easing plan is enormous. The bank currently has ¥135trn of outstanding bonds, and plans to increase that to ¥270trn. That's an easing programme of £1.878trn, compared to the Bank of England's asset purchase programme of £375bn over the last few years.

But the "qualitative" aspect of the easing is even more groundbreaking:

In addition, JGBs with all maturities including 40-year bonds will be made eligible for purchase, and the average remaining maturity of the Bank's JGB purchases will be extended from slightly less than three years at present to about seven years – equivalent to the average maturity of the amount outstanding of JGBs issued.

Increasing the money supply by such a monumental amount is a risky move. The classic equation for money, MV=PY, holds that if the (V)elocity of money – the rate at which money changes hands – stays fixed, then an increase in the (M)oney supply must lead to an increase in either the (P )rice level, or output (Y), or both. The BoJ will be hoping for the price level to increase to two per cent and stay there, and for an increase in output to pick up the rest of the money; but once started, inflation can be hard to stop.

At the moment, deflation is Japan's biggest priority, but it runs the risk of jumping from the frying pan to the fire.

Perhaps the most important part of the announcement is what the FT's Kate Mackenzie calls "Communications and other Jedi matters". It's the bit where the bank attempts to push expectations in the direction they want, without actually saying what they want, because if they say what they want, people will second-guess what they want and then what they want won't actually happen the way they want it to and – look, they just said this:

The quantitative and qualitative monetary easing, introduced by the Bank today, will underpin the Bank’s commitment, and is expected not only to work through such transmission channels like longer-term interest rates and asset prices but also to drastically change the expectations of markets and economic entities.

What does it mean? We'll find out a bit more on the 26th, when the bank meets next.

Newly appointed Bank of Japan (BOJ) Governor Haruhiko Kuroda. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Inside a shaken city: "I just want to be anywhere that’s not Manchester”

The morning after the bombing of the Manchester Arena has left the city's residents jumpy.

On Tuesday morning, the streets in Manchester city centre were eerily silent.

The commuter hub of Victoria Station - which backs onto the arena - was closed as police combed the area for clues, and despite Mayor Andy Burnham’s line of "business as usual", it looked like people were staying away.

Manchester Arena is the second largest indoor concert venue in Europe. With a capacity crowd of 18,000, on Monday night the venue was packed with young people from around the country - at least 22 of whom will never come home. At around 10.33pm, a suicide bomber detonated his device near the exit. Among the dead was an eight-year-old girl. Many more victims remain in hospital. 

Those Mancunians who were not alerted by the sirens woke to the news of their city's worst terrorist attack. Still, as the day went on, the city’s hubbub soon returned and, by lunchtime, there were shoppers and workers milling around Exchange Square and the town hall.

Tourists snapped images of the Albert Square building in the sunshine, and some even asked police for photographs like any other day.

But throughout the morning there were rumours and speculation about further incidents - the Arndale Centre was closed for a period after 11.40am while swathes of police descended, shutting off the main city centre thoroughfare of Market Street.

Corporation Street - closed off at Exchange Square - was at the centre of the city’s IRA blast. A postbox which survived the 1996 bombing stood in the foreground while officers stood guard, police tape fluttering around cordoned-off spaces.

It’s true that the streets of Manchester have known horror before, but not like this.

I spoke to students Beth and Melissa who were in the bustling centre when they saw people running from two different directions.

They vanished and ducked into River Island, when an alert came over the tannoy, and a staff member herded them through the back door onto the street.

“There were so many police stood outside the Arndale, it was so frightening,” Melissa told me.

“We thought it will be fine, it’ll be safe after last night. There were police everywhere walking in, and we felt like it would be fine.”

Beth said that they had planned a day of shopping, and weren’t put off by the attack.

“We heard about the arena this morning but we decided to come into the city, we were watching it all these morning, but you can’t let this stop you.”

They remembered the 1996 Arndale bombing, but added: “we were too young to really understand”.

And even now they’re older, they still did not really understand what had happened to the city.

“Theres nowhere to go, where’s safe? I just want to go home,” Melissa said. “I just want to be anywhere that’s not Manchester.”

Manchester has seen this sort of thing before - but so long ago that the stunned city dwellers are at a loss. In a city which feels under siege, no one is quite sure how anyone can keep us safe from an unknown threat

“We saw armed police on the streets - there were loads just then," Melissa said. "I trust them to keep us safe.”

But other observers were less comforted by the sign of firearms.

Ben, who I encountered standing outside an office block on Corporation Street watching the police, was not too forthcoming, except to say “They don’t know what they’re looking for, do they?” as I passed.

The spirit of the city is often invoked, and ahead of a vigil tonight in Albert Square, there will be solidarity and strength from the capital of the North.

But the community values which Mancunians hold dear are shaken to the core by what has happened here.

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