The financial market should brace for even more capital inflows after the US Federal Reserve adopted a new policy tieing the near-zero interest rate to unemployment and Japan's election hinted at more aggressive economic stimulus.
Fed chairman Ben Bernanke announced late last week it would keep the interest rate at near zero until unemployment falls to 6.5%, down from 7.8% currently. The Fed also beefed up its third round of quantitative easing to $85 billion per month by adding $45 billion of Treasury bill purchases to $40 billion of mortgage-backed securities subscriptions, saying it would keep buying until the labour market improved.
Meanwhile, the tentative result of Shinzo Abe's Liberal Democratic Party likely winning increased the likelihood Japan will launch more stimulative monetary programmes as announced in his campaign pledges.
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