How effective will the BoJ's new expansionary policies be?

The Bank of Japan has tried to drag the Japanese economy out of the low inflation environment. However, the monetary policies issued seem less effective and the markets have kinked reaction towards these monetary policies. Once the monetary policies are first announced, the markets have positive reactions and move towards the direction that the Bank of Japan wants; however, after a while, the market reactions are reserved and move towards the opposite way. Such phenomenon happens today as well.

Today the Bank of Japan gave two points addressing its monetary policies. Firstly, the Bank of Japan sets a cap for the 10 year government bond yields at zero per cent. This is another bond buying scheme that the Bank of Japan is buying any bonds offered at this price. Secondly, the Bank of Japan will continue its current asset buying programs until the inflation target is exceeded.

In many respects, the Bank of Japan has not come up any new monetary policies, as it just promises to continue or expand its current government bond buying program and asset buying program. These two kinds of programs are part of the Bank of Japan's QE program. In the past, the Bank of Japan has not successfully achieved the inflation target, this time it still won't. The problem is deeply inside the Japanese economy and a structural reform is required. The Bank of Japan is less likely to achieve the inflation goal on its own.