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BOJ adds long-term interest rate target to massive asset-buying program

18 Comments
By Leika Kihara and Stanley White

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18 Comments
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Such wonderful and glorious news from out maximum leader Abe and sidekick Kuroda. I foresee a quick turnaround in the multi decade downward spiral. Either that or hyperinflation, hold on to your imported goods (food) prices.

4 ( +6 / -2 )

Wow , my mind just blew a fuse, the words they use make everything sound so great, only problem, I didn't understand a word of it. Seems like par for the course, confuse us all, that way make everyone think things are going great when in fact its just a smoke screen for the ## they're in.

6 ( +7 / -1 )

This announcement seems more esoteric than most, but it seems they're trying to do something to deal with the prospect of falling long term bond yields hurting pensions, insurers and others.

Well, the markets seemed to like it a bit, with the Nikkei finishing over 300 points higher.

-2 ( +4 / -6 )

And how does the man in the street benefit?

So far, Japan is on a downward spiral!

3 ( +4 / -1 )

more of the same nonsense. and the US is on the same path. I wanna own gold.

1 ( +4 / -3 )

"inflation expactations" have little impact on the day-to-day economy until rampant inflation sets in. If this is the MoF's plan, all they have to do is continue to print money, and it will eventually happen, when theeir ability to borrow domestically has ended. On a related note, 90+% of monies going into postal savings accounts and life insurance policies are being used to purchase soon-to-be-worthless Japanese government bonds (debt) that investors will have to take a haircut on, or which will be discounted or defaulted in the future. Even if your long-term plans are to stay in Japan, now is the time to get your savings out of here. Bring it back after hyperinflation sets in, or have it available when you have to leave the country

3 ( +3 / -0 )

BOJ proposal to stimulate asset buying would good results and the same would be accelerated if the nature of assets is productive like setting new factories preferably abroad. Worth noting example is Suzuki Motors Corporation. It invested say JPY 100 about 25 years ago OM India, today's worth is JPY 8400. Not only the value, it and its Vendors exported billions of Dollars of goods from Japan to India and earned huge profits besides the huge appreciation in the net worth.. Such investments also strengthen the relationships between Japan & India. India and it's people have also been benefited .SMC project helped India in IndustralisationClarke scale employment, huge contribution State excheqor and major boost to export of Auto Components. Win win situation for both Japan & India

Investment in such productive assets would be constructive and help in achieving much more than targetted

-2 ( +0 / -2 )

Disappointment to say the least. Instead of going deeper into negative interest they have decided to try to control yields on J bonds hoping to weaken the yen. With lower yields they figure money will go elsewhere. This is basically a bit of good news for J banks that stood to lose more with deeper negative interest. As far as weakening the yen goes, they can only hope for US Fed rate hikes. If the Fed hikes rates tomorrow the yen will weaken, if not it will probably stay in a short range between 100~105 until the next policy meeting in December.

4 ( +4 / -0 )

The BOJ honchos believed that they could manipulate inflation as they stated, but they can't. They told parliament that BOJ board members should resign if they failed to achieve their mission, but at least they are persistent in not giving up, I guess.

Ironically they have now added an "inflation-overshooting commitment" to their "toolkit"... In the first place, they failed to generate 2% inflation for even a single reading, let alone sustain it. Secondly, given their demonstrated lack of pinpoint control over inflation, it's obvious that should they ever succeed in reaching the target, they would certainly overshoot it as well (that's the very thing that some of us are afraid of).

The BOJ said in today's statement that it

"... believes that its monetary policy and the Government's fiscal policy as well as initiatives for strengthening Japan's growth potential will produce synergy effects, and thereby will navigate Japan's economy toward overcoming deflation and achieving sustainable growth."

They should say that louder. The problem is not monetary policy - as the BOJ tries so hard to emphasise they are doing way more than the US FOMC or the ECB. It's the dearth of promised structural reforms by the Government that's at fault.

Alas the Japanese government policy makers will never get it right.

3 ( +3 / -0 )

JeffLeeSep. 21, 2016 - 05:16PM JST

Well, the markets seemed to like it a bit, with the Nikkei finishing over 300 points higher.

You must be an investor's nightmare.

Wait until the end of Friday's trading before you make such a prediction. I predict the Nikkei will be lucky to stay above 16000.

0 ( +4 / -4 )

What seems obvious to me is that Kuroda does not know what he is doing but is acting by necessity as if he knows what he is doing. Please note that that the Abe government's economic policies have not worked. Printing money? Helped exporters and screwed importers, thus raising prices. The people, as I predicted they would, spent less money. Sellers had to make adjustments, which was usually to give less for their money in some way. Finally, the yen rose again. Certainly Britain's vote to leave the EU hastened this. But it would have happened away because you simply cannot keep printing money forever to keep a currency low. Well, good luck Kuroda. But if you are going to screw the people with your economy policies I can only hope you fail.

2 ( +2 / -0 )

Look up current USD/JPY (let alone anything /JPY) since the meeting and it's clear that this so called strategy is already failing pretty hard....

2 ( +2 / -0 )

10 yr rates at zero - great for mortgage rates and for the real estate market!

1 ( +1 / -0 )

Kuroda is out of his depth and has no idea what he is doing. He wants to keep 10 year bond yields at zero percent, so why would anyone (except Kuroda) buy them? Cash also yields zero percent, but you can spend it when you want and the nominal value remains the same. If you have a 10 year bond you might not be able to sell it for the amount you paid, or the government might default on repayment and it's less liquid than cash. Kuroda is saying that all those factors don't merit any yield at all? The man is an idiot.

1 ( +1 / -0 )

If rates are zero, it makes sense for regular people to hold cash. If you're a bank or a fund trying to hold 100,000,000,000 in cash, it's not practical until rates get below about -.1% and stay there for a year or so.

1 ( +1 / -0 )

@Gary-Raynor

"Wait until the end of Friday's trading before you make such a prediction. I predict the Nikkei will be lucky to stay above 16000."

You're wrong again. Nikkei ended on Friday around 16,650. Slipped a bit but still up 250 points from the BOJ annoucement.

"You must be an investor's nightmare."

Hilarious. So what does that make you?

Well, I was right, but it's not about being right, is it? It's about telling a narrative that gives a warm and fuzzy feeling to folks who don't know any better. In the vein of Donald Trump.

2 ( +3 / -1 )

@jefflee dont worry jeff , gary predicted that the yen would be in the low 90s by now and with the likely US fed raising rate before years end look even more unlikely the yen will even stay in the 90s for any period of time. Im glad I don't take any financial advise from JT experts, id be bankrupt years ago!

0 ( +1 / -1 )

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