business

Abe adviser says benefits of BOJ's negative rates 'very big'

15 Comments
By Stanley White and Izumi Nakagawa

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15 Comments
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Of course he says that. He's Abe's advisor. What else do you want him to say? The truth???

4 ( +6 / -2 )

Nishimura is quite simply, an idiot

3 ( +5 / -2 )

Nishimura is quite simply, an idiot

Simple is best. Well said!

-1 ( +2 / -3 )

Someone's in denial thinking that way.

4 ( +4 / -0 )

Negative rates have been very successful in pushing government bond yields lower, and borrowing costs have also fallen.

Allowing for even more irresponsible deficit spending, breaking all previous records.

Bank lending to the real estate sector has risen dramatically, leading to more real estate development.

Does anyone realize how bad this is? Real estate in Japan is basically a dead-end game, where property and buildings universally depreciate in value, which is the opposite of other developed countries. It also shows that there is little or no investment in industry, retail, research and development, or other job-creating industries. The money is going into real estate because it is expected to created the smallest loss in that sector.

And the only part of Japan which is benefiting from this real estate development is Tokyo. The rest of the country continues to see real estate prices plummet, with nearly 20 million buildings now vacant.

Then we have to consider that zero or negative rates adversely affect the standard business models of banks and insurance companies, who are already having enough time trying to find places to invest their money in a rapidly shrinking economy.

Nishimura is another academic economist with no real-world work or business experience. I wouldn't hire this guy to manage a ramen shop, as he would likely put it out of business in a year. Yet he and his like are the kind who become economic advisors to the politicians of developed countries. Is it any wonder that things are as bad as they are?

3 ( +5 / -2 )

abes employee agrees with abe? stop the presse!

3 ( +4 / -1 )

Great isn't it, people who couldn't afford to take out a mortgage now can. What could go wrong?

Even for people who refinance their loans and get more disposable income, it doesn't mean they will spend that rather than save it in the tansu.

The monetary madness only gets us so far and a more dynamic environment for businesses to run in is required before things will ever pick up.

Enjoy your weekend everyone

2 ( +2 / -0 )

negative interest rates???

This reminds me of a Far Side cartoon.

There is a rather dumb looking guy standing at the door, talking with a salesman. He scratches his head and says, "Double your IQ or no money back. Yeah. Sounds good to me!"

-1 ( +1 / -2 )

Banks have various costs, such as paying their staff, managing their buildings etc. These costs are fairly constant. No matter how negative the fool Kuroda makes the interest rate there is a floor below which mortgage rates cannot fall as banks have to cover their costs. All Kuroda is doing is making banks unprofitable.

I still haven't heard a good explanation as to why anyone would lend money at less than 2% per annum (the inflation target). If Kuroda manages to hit his target the lenders will be losing money. Maybe the only person who expects the inflation target to be reached is the delusional Kuroda.

I respond to low interest rates not by spending my money but by looking for higher yielding investments. If the interest rate is low I have to spend less and save more to ensure a comfortable retirement.

1 ( +1 / -0 )

Have lower mortgage rates resulted in increasing construction of housing? Corporations are sitting on piles of money they won't invest until they see an uptick in consumer demand. If the govt wants to provide economic stimulus, it would cut taxes or put money into the hands of everyone who makes less than the median income.

1 ( +2 / -1 )

Let's see who buys this.

2 ( +2 / -0 )

pretty much everything abe and his government issue in press releases is the opposite of reality

5 ( +5 / -0 )

Now if only the banks would offer me a negative rate on my mortgage...

2 ( +3 / -1 )

anotherexpat: good comment. Consumption is 60 percent of GdP, so they need to focus on the demand side.

The super loose BOJ policy isn't terribly harmful, the problem is that it can't be effective when businesses are hoarding cash and deleveraging while consumers aren't getting big raises and anticipating a higher tax bill on their shopping.

-4 ( +3 / -7 )

The super loose BOJ policy isn't terribly harmful,

It is terribly harmful because it is not at all necessary. japan has never suffered from a lack of monetary liquidity. Banks have always had a lot of money on deposit, and there has never been a threat of a run on deposits.

the problem is that it can't be effective when businesses are hoarding cash

Stop for a moment and think. Why are businesses hoarding cash? If you have an ounce of knowledge about the running of any business, you know that money which is not used might as well not exist. Businesses universally invest their profits so as to earn a further return on them. And successful businesses know when and where to invest their money. If they could use their money to make more, they would do so without hesitation.

And, let's not forget, if businesses are "hoarding money", it is their money to hoard. They earned it, they can use it or not use it as they like, that is their right, just as it is mine or yours. Businesses have the right to spend their money as they please, just as you or I do. You can go and blow all of your pay at Bic Camera, and max out your credit cards to buy more. Bic Camera will earn a little more money, but what good will it do you?

consumers aren't getting big raises and anticipating a higher tax bill on their shopping.

Why should consumers be getting big raises? We all know that the population is falling by hundreds of thousands of people per year, right? You do know about that, do you not? And with hundreds of thousands of fewer consumers, there is lower demand for food, housing, cars, clothes, iPhones, and everything else. And when consumption is falling, and companies are earning less and less money, how exactly can they afford to pay more?

Before you say "they should use the cash they are hoarding", what cash do Japanese companies really have? If you subtract capital gains from the recent stock boom from their balance sheets, Japanese companies are not sitting on any cash at all. None. In fact, most are swimming in red ink. With no current growth, and no future prospects for growth, how long can the stock market maintain it's current high level?

You said before that loose BOJ policy is not that harmful. But every yen of the current increase in the stock market has been created by this loose policy. Why do you think that the stock markets around the world jump or decline on news or rumors of more or less QE, or changes in interest rates?

Companies know that the current stock prices do not reflect the true value of their companies, and they also know that these prices cannot be sustained for long. And they know that when the market "adjusts", they are likely to lose all of their capital gains, and probably more on top of that.

If such a thing happens, of course you will blame the companies, the bankers, the stock traders, and everyone else. But you won't blame the government, who's vast debts are the main reason behind QE and zero or negative rates. And you won't blame government policy for creating the environment where consumers can't pay a fair price for the goods and services they want, or where business can't earn a return on the cash they are "hoarding."

5 ( +5 / -0 )

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