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Can Japan boost the rest of Asia?

​Japan is in the middle of a substantial monetary easing programme aimed at boosting its economy, but in principle this could also have positive spillovers to the rest of Asia through higher import demand and capital flows and financial linkages. So far, these spillovers appear to have been modest, and Japan’s large devaluation may even have damaged the export prospects of some of its Asian neighbours. The widely-anticipated large portfolio capital outflows from Japan to the rest of Asia have not yet materialised, although there may yet be some pick up both in these and overseas lending by Japanese banks. But even though Japanese quantitative easing will be very substantial over the next year it will not be able to wholly offset the ‘tapering’ of asset purchases by the US Federal Reserve.

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