Bank of Japan Governor Haruhiko Kuroda Photo: REUTERS file
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BOJ assets quadruple to ¥714.56 tril under Kuroda's aggressive easing

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Wow! Pretty soon they will own everything, then what happens?

19 ( +19 / -0 )

With this kind of sovereign debt they can never raise interest rates so inflation has to come eventually. I'm impressed how long they've managed to kick the can but it's gonna hurt one day as it can't go on forever.

Countries around the world are doing the same thing too, ZIRP and NIRP all over the place. Not going to be pretty.

17 ( +18 / -1 )

What is the BOJ good for ?

It sucks up the yen in a moribund economy!

Japan has been in a malaise since 1991, the banks under the auspices of the BOJ stopped funding to landowners, Japanese companies rushed to invest in China and the sales taxes rose to a maximum of 10%.

There is no growth in a country without land to expand and with a large expanding group of old people.

The government is failing to tackle the pandemic properly and ignores its citizens.

What a perfect storm!

14 ( +20 / -6 )

30 plus years of malaise yet you and others are not leaving.

No longer in Japan...

11 ( +12 / -1 )

Sounds like he lumped on Bitcoin!

10 ( +10 / -0 )

BOJ to have losses on its ETF holdings if (when?) the Nikkei goes to 20,000, by its own estimate...

Might want to get a fresh new central bank ready to replace this one.

distorted market mechanisms.

soaked up liquidity in the market

Geniuses at least bankrolled profligate government overspending for close to a decade I guess...

The government is failing to tackle the pandemic properly and ignores its citizens.

The citizens thinking they have to keep voting for the same clueless politicians is a big part of the problem.

The government is supposed to serve the people, the people are entrusting certain powers in an elected government. The people need to start acting and thinking like they are the boss.

10 ( +11 / -1 )

Well I live in Japan, pay tax and have invested in property all through a company my wife and I created, company car...you get it lower tax rate as the income is not personal. Inheritance tax not an issue as I die one of my kids steps in and all good.

‘But I have noticed consumer goods getting smaller, but the same price?

a tissue box is nearly half the size it was a year ago? Chocolate is the same in many cases. I blow my nose a lot when eating chocolate watching tv. My renters are ringing me in tears because they can’t pay the rent, so we take them to the local municipal office to get them support and we reduce their rent. People deserve a basic right to have a roof after all. My point is quadruple assets mean nothing to people if they are slipping further and further into poverty. In these idiots minds having a crowd of malnourished people wearing rice sacks cheer then is validation. It’s a policy not one I want.

10 ( +10 / -0 )

Actually, more gaijin want/wish to come and "enjoy" Japan's malaise!

No gaijin comes here for the economy and the money to be made. The top income tax here is 50%, while in Singapore and Hong Kong it's 15% with no capital gains tax at all. So almost all professional foreigners will go to those places. Yes, there are still plenty of foreigners who want to come to Japan, you are right about that. But the reasons have nothing to do with the Japanese economy.

10 ( +13 / -3 )

They could cancel the bonds or let them run to maturity. Then a big chunk of Japan's public debt, potentially up to 45%, would disappear.

Moody's, S&P, and Fitch won't sit and idle. They will downgrade the whole country of Japan and Japan corporate world to CC or D as they once did to Japan during the bubble burst era.

https://www.reuters.com/article/us-japan-economy-fitch/fitch-downgrades-japan-joins-moodys-in-warning-on-fiscal-policy-idUKKBN0NI0SS20150427

Fitch downgraded Japan because of this particular issue with the BoJ.

In the past, these firms are so powerful that the US government scared so bad that they were panic over S&P downgraded US debts. President Obama and the whole US Congress were rushed to criticize the firm, and they even commenced an investigation against a private corporation!

https://en.wikipedia.org/wiki/United_States_federal_government_credit-rating_downgrades

To this day, S&P still stood by its decision of keeping AA+ level. The US government failed to force the firm to change its mind.

7 ( +9 / -2 )

Better the BOJ hold the assets than any foreign bank or entity.

6 ( +10 / -4 )

The world is pretty corrupt. There is plenty of other countries that are worse than Japan. Global economy needs base currencies to exchange and benchmark. Most countries in Asia are too volatile and untrustworthy. Until you have a strong Asian country that can address this concern, Japan will continue to enjoy its status in global currency. Its the reason why the Yen and USD go up during rescissions, its because people trust to put their money their during unstable times. There may be a time when confidence in yen crumbles but the competition is pretty weak in terms of competing currency.

5 ( +7 / -2 )

Jeff, debt by its very definition an obligation between parties.

Debt, has a set value, and is serviced by payments to the creditor.

Debt at its very basic level is a deferment.

Jeff your comment actually answers the questions you pose.

My earlier post and the Reuters link is self explanatory.

The suggestion that the Government of Japan can finance its own debt by some form of financial slight of hand is a myth an illusion.

A house built on sand. Sooner or later that house slides into the river.

Jeff referring to public sector institutions, effectively levels of government, government controlled.

Bottom line Jeff, you borrow money, you have to pay it back, service the debt.

Jeff, I am not having a pop.

Jeff, I have borrow large sums of money, the creditors want that debt serviced or what is the point in lending my business the money in the first place? There is not difference for Government.

The loser in Japan case will be its people, that will have to service that debt

5 ( +5 / -0 )

Its the reason why the Yen and USD go up during rescissions

The US considers Japan a currency manipulator

https://www.nippon.com/en/news/kd755813024713031680/

but the competition is pretty weak in terms of competing currency.

Singapore Dollars definitely, and even Australian Dollars are valued much more in line with fundamentals, than the smoke-and-mirrors the Japanese economy is.

4 ( +7 / -3 )

I am not an Economist, nor I really understand this wall street chat, but isn't it bad when the central bank has assets that exceeds the country's total GDP? or is it the opposite ?

I like the Idea that the BOJ has eased lending to banks and that funds were provided to all companies effected the pandemic, it was a well needed shot in the arm.

4 ( +4 / -0 )

@Cricky

The reason that your tenants do not have money is because money is not being made available to the consumer by the banks - at the top of that is the BOJ

I’m just back in the UK and can access 3 million yen in credit at zero rates for 18 months.

This gives me peace of mind that I can grow my business here without worry

4 ( +4 / -0 )

This is economically unsustainable, fiscally monetarily.

It is politically dishonorable and cowardly to suggest otherwise.

There is no magic money tree, printing press.

It is a myth, a class room sixth form debate.

The reality will bring destitution on a unprecedented level.

4 ( +5 / -1 )

With this kind of sovereign debt they can never raise interest rates so inflation has to come eventually. 

Shortmemories, inflation will only come once people spend. The problem is that the yen the government has been pumping into the economy has mostly been stuffed under mattresses. Creating supply is easy; demand, not so much.

3 ( +3 / -0 )

but if one goes into a store and buy by card one has to sooner or later service the purchase.

And if one services only the interest and doesn't repay the principal, and instead keeps adding on it, like many govts do, then will surely to financial ruin

3 ( +3 / -0 )

The BOJ is actually creating money by taking institutions' securities and giving them cash in exchange.

And that is why Japan is currently in another recession!

2 ( +6 / -4 )

BOJ to have losses on its ETF holdings if (when?) the Nikkei goes to 20,000, by its own estimate...

Goes to? It's pushing 30,000 now, so what are you trying to say?

2 ( +2 / -0 )

If their money has quadrupled, my money must have shrinked to a quarter. Yes, it has. And therefore I agree to what is written above. lol

2 ( +3 / -1 )

I am not an Economist, nor I really understand this wall street chat, but isn't it bad when the central bank has assets that exceeds the country's total GDP? or is it the opposite ?

You should always look at the country's Net Asset. In case of Japan, BoJ is actually to be consolidated with Japan's balance sheet

2 ( +3 / -1 )

Undermining the currency be it by adulterating the metal content, printing notes or “quantitative easing”, it has never ended well and no this time is not different. Inflation is not a question or if but when.

I fear there will be an almighty international monetary melt down as people lose faith in fiat currency (who trusts money backed by a politicians promise?) at which point god help the ordinary person as they will be the ones hit hardest.

2 ( +2 / -0 )

Reckless, my friend, this maybe a over simplification. but if one goes into a store and buy by card one has to sooner or later service the purchase.

Ok let's take that theory one step further

Japan Ministry of Finance to seek $242 billion for debt servicing FY2021/22: draft.

https://www.reuters.com/article/us-japan-economy-budget-idUSKCN26F1O7

2 ( +2 / -0 )

no need to pay loans back when you owe yourself! its a borrowing free-for-all when will it crash

2 ( +3 / -1 )

Quadrupling the BOJ’s assets (liabilities) through their ledger tricks has turbocharged all asset classes. Great if you were on board for the ride; not so if you had few assets to begin with. This shifting of the goalposts has meant that, for the majority, acquiring even a modicum of wealth has blown out to Yahweh knows when. All hail these new self serving Caesars, tone deaf to the agony of the masses who will surely be the ones who suffer the most for this profligacy. Pursuing contradictory positions simultaneously, as if channeling Emerson’s indictment of a foolish consistency being the hobgoblin of small minds. Beseeching the gods for a 2% inflation rate at the same time as their free money is engineering asset inflation multiples of that. Truly awe inspiring chutzpah, their nonchalant disregard of elementary logic and true believer conviction in magic pudding fiscal alchemy.

2 ( +3 / -1 )

Jeff, we have to pay it back, I have learnt that the hard way.

Early on I had to borrow from the bank of Mum and Dad.

To finance my education, they both handed over there life savings. I payed it back.

I have borrow and have had invest capital, that all want a return.

The is no escape.

2 ( +3 / -1 )

Interesting discussion.

Not in the case of public finance in an economy that can print money or buy its debt when it chooses, ergo, Japan

If Japan can print money whenever it chooses, why borrow at all?

2 ( +2 / -0 )

Pretty soon they will own everything, then what happens?

They could cancel the bonds or let them run to maturity. Then a big chunk of Japan's public debt, potentially up to 45%, would disappear.

It sucks up the yen in a moribund economy!

The BOJ is actually creating money by taking institutions' securities and giving them cash in exchange.

1 ( +10 / -9 )

If their money has quadrupled, my money must have shrinked to a quarter. Yes, it has. And therefore I agree to what is written above. lol

Exchange your Yen for your currency NOW although you might regret it.

1 ( +2 / -1 )

Reckless, you may well ask,

All the debt, will have to be serviced. until the servicing costs reach a critical point of no return.

The number are starling, at the same time an criminally irresponsible folly.

The people of japan will ultimately receive the sucker punch.

The most vulnerable in society will pay.

1 ( +2 / -1 )

kurisupisu

@Cricky

> The reason that your tenants do not have money is because money is not being made available to the consumer by the banks - at the top of that is the BOJ

I’m just back in the UK and can access 3 million yen in credit at zero rates for 18 months.

This gives me peace of mind that I can grow my business here without worry

I did that here and for 10 years interest-free. Repayments to start in 2023.

1 ( +1 / -0 )

ian, yes, without complications, well disappearing up one own backside.

Your comment sums up the issue perfectly.

1 ( +2 / -1 )

Will it be a crash or a long and slow decline like we are seeing over the past 20 years? Maybe that is the best option.

1 ( +1 / -0 )

This is all good but what good does all that money do when your not using it to support the same people who gave it to you in the first place. Why not use it to vaccinate your send a stimulus payment to the those in need like the disabled and low income households. Surely it's much more humanitarian to do such good vs hoarding it.

1 ( +1 / -0 )

Can't trust Yen? When is Yen going down to equal to $200????

0 ( +1 / -1 )

All the debt, will have to be serviced. until the servicing costs reach a critical point of no return.

2 comments. First, if the BOJ holds 40% of the bonds then the interest payments will to some extent go from the government to another part of the government mitigating the servicing costs. Second, assuming you are correct, then this means that the government in Japan (and the US as well), simply cannot permit interest rates to rise.

0 ( +0 / -0 )

concrete crumbles as time goes by.

0 ( +1 / -1 )

We could debate headlong until Christmas on the theory of inalienable debt.

The reality is real world.

Creditors of all shapes and sizes want there money back, or bailiffs will be out of business.

I have approached debt from a number of angles, the so called zero option, the ability to generate capital resource to self finance debt.

A number of capital finance structures. The leveraging of finance through accelerated growth.

At the end of the month the same conclusion, you pay, one way or another.

Don t believe for one moment that Governments are any different.

0 ( +1 / -1 )

Don t believe for one moment that Governments are any different.

Governments like Japan's have a money printing press. You and I do not. Currency issuing governments are very, very different. As to be incomparable.

@ian

If Japan can print money whenever it chooses, why borrow at all?

Great question. The answer: because Japan doesn't borrow its own money --it issues money. The yen is spent into existence by the govt, and the BOJ creates yen when it issues it to the commercial institutions to buy their bonds. (Taxes as well as govt bonds are to absorb surplus funds that these actions create-- not to pay back any "debt." )

If you have the power and ability to issue something, then why would you need to "borrow" any of it?

0 ( +1 / -1 )

Jeff around 66% ish of J government bonds are snapped up by the Bank of J

The rest are hovered up by government controlled trust funds, insulating the yields from any consequence of the bond markets.

.

0 ( +0 / -0 )

A bear market could easily see it back to 20,000.

Whoever thumbed it down must be long the Nikkei and maybe with an average above 20,000 :)

0 ( +0 / -0 )

Nope that’s not how it actually works.

So you tell me how it works. Can't? Didn't think so.

Where did those bonds come from?

The government. What's your point?

@ rocknroll

Jeff around 66% ish of J government bonds are snapped up by the Bank of J.

Yes, I guess so. I know the cumulative total is around 45%. The BOJ, a public sector institution, owns nearly half of the "public debt." So why so worried?

From many years back, the deficit hawks predicted skyrocketing rates, skyrocketing inflation, tanking yen, bond market collapse, etc. . I predicted the opposite would occur. How about believing those who got it right rather than those who consistently get it wrong over and over again for many years?

0 ( +1 / -1 )

And that is why Japan is currently in another recession!

It's in a recession because of something called "COVID-19." Look it up. That was directly preceded by a consumption tax hike. Neither events had anything to do with the BOJ. Congrats, though, your "interesting" comment got three pluses and no minuses until me. Seems people here don't like facts.

-1 ( +3 / -4 )

‘But I have noticed consumer goods getting smaller, but the same price?

a tissue box is nearly half the size it was a year ago? Chocolate is the same in many cases.

That is so not true!

-1 ( +4 / -5 )

Reckless, you may well ask,

All the debt, will have to be serviced. until the servicing costs reach a critical point of no return.

The number are starling, at the same time an criminally irresponsible folly.

The people of japan will ultimately receive the sucker punch.

The most vulnerable in society will pay.

Logically YES. You don't have to be Ghosn for spending 24h/day 365 days for lessening/evading Japanese Yen Tax liability.

But No. It is not that simple. Who would have to pay in the end? The wealth through legacy tax.

-1 ( +0 / -1 )

rocknroll

Jeff, debt by its very definition an obligation between parties.

Not in the case of public finance in an economy that can print money or buy its debt when it chooses, ergo, Japan. This situation is not "debt" and should not be called that, as it is a wholly different beast from your private debt or loans taken out from private creditors or foreign govts, as in Argentina's case.

Japan doesn't issue bonds to "service" its debt. It does so to soak up liquidity ("cash is trash") and the BOJ needs bonds to conduct monetary policy. The BOJ has proved that it can buy these bonds (the government's "debt") whenever it chooses. So whatever "obligation" that some people assume exists is not a thing.

 the Reuters link is self explanatory.

It's an article about a budget request, which is a number on a spreadsheet.

Reuters: "...underscoring a struggle for the heavily indebted government to finance snowballing debt..."

"Struggle"? What struggle? Don't check the article, because altho it mentions "struggle" it doesn't give any examples of any real-world struggles caused by Japan's large fiscal debt. Naturally. Because there aren't any. In fact, it says the govt has not placed any spending limits. Because it doesnt have to.

-1 ( +1 / -2 )

The yen is spent into existence by the govt

Nope that’s not how it actually works.

and the BOJ creates yen when it issues it to the commercial institutions to buy their bonds.

Where did those bonds come from?

Work through it and you’ll get the order right eventually

-1 ( +0 / -1 )

So you tell me how it works. Can't? Didn't think so.

Huh? How many times have I already!!

Government (MoF) issues bonds, not currency, that’s how the commercial sector gets them, and that’s who flipped most of them to the BoJ.

Simple, reality. You won’t find your MMT dreams anywhere in actual reality, and sorry but people running these operations know that’s how it works despite backwards MMT superstitions about it all.

-1 ( +0 / -1 )

The BOJ, a public sector institution, owns nearly half of the "public debt." So why so worried?

The history of public finance has lessons about why central banks are supposed to be independent.

Perhaps the lesson that will be drawn this time is that central banks are more of a cancer than a cure.

-1 ( +0 / -1 )

Goes to? It's pushing 30,000 now, so what are you trying to say?

Well, it failed to stay above 30,000, and some were saying it would aim for all time highs around 40,000 this year.

A bear market could easily see it back to 20,000.

-2 ( +0 / -2 )

This is economically unsustainable, fiscally monetarily.

Care to explain how buying and holding your own debt is "unsustainable", (amid persistently low inflation and interest rates)?

All the debt, will have to be serviced. 

No it won't. If a public sector institution buys its govt's debt, then that public debt is effectively neutralized and the institution can choose to cancel it or let it run to maturity, at which point the proceeds flow back to the MOF.

isn't it bad when the central bank has assets that exceeds the country's total GDP? 

Not if inflation is under control. And in Japan, deflation, not inflation, has been boogie man for a long, long, long time.

-3 ( +1 / -4 )

"Japan has been in a malaise since 1991, the banks under the auspices of the BOJ stopped funding to landowners, Japanese companies rushed to invest in China and the sales taxes rose to a maximum of 10%.

There is no growth in a country without land to expand and with a large expanding group of old people.

The government is failing to tackle the pandemic properly and ignores its citizens.

What a perfect storm!"

Yet they are the world's largest creditor Nation, have more available disposable capital investment than China.

Own 90% of their INTERNAL debt.

30 plus years of malaise yet you and others are not leaving.

Actually, more gaijin want/wish to come and "enjoy" Japan's malaise!

Enjoy your afternoon tea.

Japan must be doing something right.

-12 ( +6 / -18 )

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