The Bank of Japan’s move to expand monetary easing may trigger “an avalanche” in the yen as Japanese put money elsewhere in anticipation of sustained currency depreciation, billionaire investor George Soros said.
Calling the expanded stimulus “a sensation” and “a very daring undertaking,” Soros said policy makers may not be able to arrest the fall in the yen and capital flight as the new policy was adopted after 25 years of mounting government deficits and failure to rejuvenate the economy.
“What Japan is doing is actually quite dangerous because they’re doing it after 25 years of just simply accumulating deficits and not getting the economy going,” Soros said in an interview with CNBC in Hong Kong today. “If the yen starts to fall, which it has done, and people in Japan realize that it’s liable to continue and want to put their money abroad, then the fall may become like an avalanche.”
The BOJ’s new Governor Haruhiko Kuroda laid out plans for Japan’s biggest round of quantitative easing, expanding the central bank’s balance sheet by 30 percent of gross domestic product between now and the end of 2014.
“If what they’re doing gets something started, they may not be able to stop it,” Soros said.
The yen touched the weakest since August 2009 against the dollar and fell as much as 0.8 percent lower to 97.06 yen.