The whole world is watching closely for any indication of more stimulus packages being issued. In Japan, the government has approved a new package, which should provide a temporary boost to equity prices. At the same time, the value of gold isn’t budging all that much, further confirming its resiliency.
A new Japanese Stimulus Package Arrives
Similar to most other countries in the world, Japan will issue a stimulus package to boost its domestic economy. Although the impact of the COVID-19 pandemic has been relatively subdued compared to neighboring countries, the domestic economy has ground to a near halt just as well. Finding a solution is anything but easy, but it certainly can be done through the right approach.
A stimulus package can work both ways in this regard. First of all, it is designed to prop up the equities market of Japanese firms. As such, investors should express an increase in risk appetite and focus on stocks and equities once again. Whether or not that will be the case, is a very different matter altogether. Long-term repercussions of injecting extra money into an economy are not always as they may seem at first.
When a stimulus package is introduced, the precious metals are often the first to face some pressure. This time around, that is anything but the case. While the price of gold and silver took a very minor dip, the overall trend hasn’t been broken in a significant manner. That is primarily due to ongoing political tensions between the US and China, as well as the Hong Kong situation.
According to local sources, this latest stimulus package is worth nearly $930 billion. It is not as steep as packages approved by the Federal Reserve recently, but it goes to show that trillions of fresh liquidity has become a necessity in this day and age. That is not the right path to go down on by any means, but central banks know no other course of action but printing extra money.
Charge up Your Investment Portfolio
Regardless of the short-term implications of Japan’s new stimulus package, the long-term game is what everyone should be concerned about right now. Injecting extra money – that isn’t backed by real value or assets – into an economy will ultimately trigger more decay and ruin.
For consumers, this means that their purchasing power will keep decreasing over time. Companies, on the other hand, will be forced to spend more money to provide the same products and services as before.
Offsetting that imbalance requires a solid investment portfolio. Very few assets provide actual returns on investments capable of keeping one’s purchasing power afloat, or even improve it.
As such, the interest in gold, silver, and cryptocurrencies is likely to keep increasing all over the world. Whether that will lead to spectacular increases in value, is a very different debate. Markets have always been unpredictable, and tend to do their own thing. Cryptocurrencies and precious metals often thrive regardless of what is going on in the world of politics and governments.