News that Japan will fall short on stimulus has strengthened the Yen back below 105 to the dollar. Market expectations are looking for more to be done in terms of Fiscal stimulus. While the BoJ is expected to ease policy further at the end of its meetings, there isn’t too much that can be done without the fiscal side stepping in.
This issue is not unique to Japan (though more urgent). European countries are in need of direct stimulus to their economies and banking sector but are prevented from doing so by Euro regulations. The UK post referendum will most likely see a slowdown and depending on the severity, may have to see more than rates cuts to spur growth again. Japan is beyond the point where it will need government spending to pick up. Shocks to the currency after the introduction of negative interest rates was unexpected and there could be more uncertainty with a deeper cut into negative territory. Therefore it will be a better bet to have a coordinated effort, greater than expectations, which show investors and retailors you are serious about starting the economy back up.
Until these issues get fixed in Japan you can use the country’s economy as a sign of things to come for the EU. Doing too little too late diminishes the shock value of the moves and will put businesses and investors into wait and see mode before taking action after stimulus does occur.