BOJ's balance sheet tops Y500 trillion; on cusp of overtaking Fed

By Hideyuki Sano

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Either some of the JGB's they own won't be redeemed or they will monetize the debt or we are facing some form of economic contraction when they finally run out of steam.

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"Either some of the JGB's they own won't be redeemed or they will monetize the debt or we are facing some form of economic"

Or something else entirely. A false trichotomy? I think you have listed the three most panicky probabilities, but the least likely.

Come on. Really? This is not an EITHER OR situation at all. I can think of at least five other outcomes that are extremely boring. The most likely outcome is that nothing is going to change at all. The debt will be rolled over. The interest rates will stay low, as they probably should, and the assets of dead people will be taxed away to pay for the debts of dead people. Inflation will stay low for fundamental, not monetary reasons. If it goes up a bit, so much the better. 3% inflation is not going to panic or kill anyone.

The market agrees with me. Go out and try to short the yen. You will get a lot of takers. And that should tell you something.

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3% inflation is not going to panic or kill anyone.

Inflation is not the problem, it is lack of inflation. Even with interest and bond rates as low as they currently are, Japan's debt is so large that debt-servicing costs account for more than 25% of total government expenditures.

Japan needs inflation to lighten it's debt burden, because without inflation, either more must be spent on debt-servicing costs, or Japan must borrow and spend less. Abe's record budgets are all formulated assuming an inflation rate of 2%, and absent this minimum rate, the ability to repay the money borrowed to fund this spending is diminished.

The fundamental problem is that Japan's rapidly falling working population will reduce consumption, demand, and inflation. Japan's rapidly increasing non-working population will require increased spending to meet entitlement spending on pensions and healthcare.

Borrowing, printing, and spending record amounts of money is not going to solve Japan's demographic problems, but it will keep the politicians and their cronies comfortable.

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go out and try to buy the yen and you will get a lot of sellers too.  Especially when NK or some other nutter isn't unsettling the planet.  The myth of the yen as a "safe haven" persists.  sure I didn't list ALL the possible outcomes as we don't know what they.  but one way or another owners of JGB's are not going to see their expected return on investment.  given that the biggest owner is the BoJ, that can't be good for Japan Inc.

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Yawn .... this is not rocket science.... the reality is this ... the farmer.... the suppliers ... the retailers simply need to dramatically cut their grossly overpriced products and do it overnight .... then gradually increase their prices .... instant inflation ... sustainable inflation .... I'm tired of the same old lies ... "extremely volatile food prices." When Japan is the worlds only major industrialized nation that food prices are NOT included in their GDP and the price of OIL IS.... Truth be told ... TPP would've been great for the consumer .... 300¥ for an apple or pear ... lmao ....

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Borrowing, printing, and spending record amounts of money...will keep the politicians and their cronies comfortable.

Doesn't help politicians much. Much of the "accomodative" policy is done to support corporate profits. Japanese companies earned the highest pre-tax profits in recorded history in the last quarter of last year.

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