Monthly Archives: November 2014

The Bank of Japan wants to introduce a big quantitative easing program that consist of buying 80 trillion yen ($705 billion US) every year until their economy is no longer at risk of deflation.  To put this in perspective, the estimate for the US quantitative easing program was $831 billion. A quantitative easing program is a program by the Central Bank of a country that buys government bonds that then increases the price of bonds and lowers interest rates. This allows people to borrow money at lower interest rates so they end up spending more money and the economy grows. Japan has struggled with deflation over the past couple of decades.  The deflation rate is hovering around 0% inflation (see picture below). Having low inflation/deflation is bad for the economy because it discourages people from spending their money, thus slowing economic growth (If you want to know why inflation is bad click here). The Bank of Japan’s governor said, “The stimulus measures this time show the Banks of Japan’s unwavering determination to exit deflation.”

Although introducing the quantitative easing program will help inflation it could do more harm than good. Quantitative easing programs can depreciate a countries currency and with Japan getting most of their energy through imports this could drastically decrease their ability import. Japan is forced to import a lot of their energy due to the earthquake/tsunami that destroyed a lot of Japan’s biggest nuclear power plants.

“Big Bazookas.” The Economist., 8 Nov. 2014. Web. 10 Nov. 2014.

<http://www.economist.com/ news/leaders/

21631028-central-bank-right-be-bold-now-prime-minister-must-follow-suit-big-

bazookas?zid=306&ah=1b164dbd43b0cb27ba0d4c3b12a5e227>.

A blog post by Kevin Kelleher called “US investors still don’t know what to make of Alibaba,” on the blog site Pando Daily caught my interest because it discusses how Alibaba does not need America to be successful. A large portion of North Americans had never heard of Alibaba before their historic IPO (me included) and a large portion still doesn’t understand Alibaba yet (if you are still one of those people that don’t know what Alibaba is click here).  In this blog Kevin Kelleher talks about how even Wall Street has difficulties projecting their revenue and profit figures of Alibaba by underestimating their profit and revenue.

To put Alibaba in perspective it has similar growing revenue as Facebook, it has a larger market value then Facebook (see picture below), and it is also trading at a lower P/E ratio than Facebook. Alibaba is growing at an extremely fast rate and is investing a great amount of money trying to grow its company. None of those plans, according to this blog, include expanding into America. This point makes sense when thinking about Jack Trout positioning theory because Amazon and eBay are already established in consumer’s minds as the go to e-commerce companies in North America. Alibaba would end up having to use a lot  of resources in order to squeezes themselves into consumer minds. It is better to stick to the foreign e-commerce markets because they are already extremely successful there. As of today Alibaba controls 80% of all online shopping in China and the China e-commerce market is estimated to grow by more than 2.4 times by 2017 (see picture below).

Wall Street Journal. Web. 5 Nov. 2014. <http://projects.wsj.com/alibaba/>.

Kelleher, Kevin. “US investors still don’t know what to make of Alibaba.” Pando Daily, 4 Nov. 2014. Web. 5 Nov. 2014.   <http://pando.com/2014/11/04/us-investors-still-dont-know-what-to-make-of-alibaba/>.