Last Thursday Christine Lagarde, the head of the International Monetary Fund, said that the threat of financial collapse in the global economy appears to have eased. She then warned that developed economies must continue with their financial reforms and debt reduction. “We stopped the collapse. We should avoid a relapse. And it is not time to relax.” She told reporters at a news conference on her outlook for 2013. Pithy comments aside, the debt crisis in the Eurozone seems to be subsiding as borrowing costs for countries like Spain and Italy have fallen. Much of the credit for the fall in borrowing costs goes to ECB President Mario Draghi for pledging to do whatever it would take to preserve the Euro, including buying the debt of Spain if necessary to keep the country’s borrowing costs from rising. Meanwhile, the Bank of Japan announced that it would revise its inflation target from 1% to 2% and announced that it would begin large scale asset purchases in one year to stimulate the economy. This move brings the BOJ in line with the Federal Reserve and the ECB in announcing steps to help stimulate its economy through monetary easing. Critics of the move highlight the fact that the BOJ announced the move in reaction to political pressure, and is a further sign that central bank independence is becoming a thing of the past. We see the move as a sign that Europe, Japan and US monetary policies will continue to be simulative, and that it is likely that easy monetary policy will continue to stimulate the world economy.