The world's central bankers, already hitting the limits of their effectiveness on growth and inflation, are now contending with another risk: that additional stimulus could produce lackluster results and undercut investor confidence.
The Bank of Japan's decision in January to take interest rates negative has sent bond yields tumbling, while doing little to curb a surging yen that's squeezing the world's third-biggest economy just when it needs a weaker currency. That's put even more monetary and fiscal stimulus on the agenda at a time when Japanese households and companies are increasingly doubting the program.
"Japan is bringing bad news to the world," said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG and a former BOJ official. "It's demonstrating that massive monetary easing doesn't work for everyone. Any additional stimulus may invite criticism from other central banks."