Furthermore, the ECB made it clear that if these measures did not work, they would consider more generalised quantitative easing, including the purchase of government bonds. Even though Japanese inflation is at a five year high, long term inflation expectations in Japan remain low and hence policy makers are unlikely to withdraw the current monetary policy stimulus.
There is rising confidence that China’s transition away from investment and exports towards domestic consumption will be managed smoothly. Risks in the housing market and related risks in the shadow banking sector remain a concern but, to date, the authorities have managed the adjustment without significant negative shocks.