Japan's yen weakened to 100 per U.S. dollar Thursday for the first time in four years. This was a critical market level, both psychologically and technically, as investors watch to see if "Abenomics" – the policies unveiled by Prime Minister Abe last fall – can finally overcome years of deflation and lackluster growth.
Monetary policy is the cornerstone of Abenomics. Under Abe's reign, the Bank of Japan (BoJ) has taken on a new governor and two new governors, all with more dovish attitudes. Not surprisingly then, this new BoJ has ratcheted up its version of quantitative easing. Hoping to reach a 2% inflation target in two years' time, the BoJ plans to expand its monetary base to 270 trillion yen by the end of 2014. That means that each month, the BoJ is buying almost as many of its bonds (about $76 billion per month) as the Fed is buying with QE ($85 billion per month), but in Japan's case, the buying is occurring with a notably smaller economy (one might call it "more bang for your yen," or "more QE per capita").