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BOJ chief rejects scaling back monetary easing as Japan 'different' from U.S., Europe

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quote: While the inflation rate is expected to rise to around 2 percent in the short run, this will be driven by energy prices and lacks sustainability.

Shouldn't that read 20%? Are Japanese people going to stop using energy supplies soon? Or is Putin going to withdraw from Ukraine, pay compensation, wrap himself in a rainbow flag and hand himself over to a war crimes tribunal? Have Japanese farmers had their kdrama-inspired wishes come true and woken up to find themselves and their neighbours all 50 years younger? Has a new, climate-proof, high-protein crop been discovered that grows on Japanese mountainsides under the shade of trees? Do Japanese manufacturers have a TARDIS to zip back in time and obtain stock from when supply chains were intact, border trade was easy and there were no sanctions and trade embargoes? Do tell.

The US and EU regimes are bedding down for a new Cold War and will not allow Japan to opt out to the extent that they usually do. And food export blocks are only going to increase. The BoJ's real agenda (as in all such cases) can be determined by working out who trousers the cash from their current policies. Just follow the money.

6 ( +7 / -1 )

Abe's economy-boosting program known as "Abenomics" entailed aggressive monetary easing. Current Prime Minister Fumio Kishida shares the view that a bold monetary policy is necessary.

That is the highest governing principle of their political economic scheme: "The QE must flow".

If instead of a Basic Income for bankers there was a QE for the people as many have proposed, the personal and spending and business creation would be through the roof. It just wouldn't be going to an exclusive clique.

2 ( +4 / -2 )

Abe said Monday the government could roll over its debt when the repayment deadline comes because it is a government subsidiary that can purchase debts.

I hate to agree him, but that's technically true. The BOJ, as owner of the securities, could even cancel/void them if it wanted to, and nearly half of Japan's fiscal "debt" would disappear in a second. This is why Japan is not Greece, Argentina, etc. and can keep issuing debt til the cows come home while maintaining low inflation and and very low interest rates.

Many other countries aren't so lucky.

0 ( +1 / -1 )

Kuroda told a parliamentary session earlier in the day he will unlikely see inflation above 2 percent in a stable manner during his tenure until next April because it will take "some time."

You had a decade to do it and achieved jack all , if it couldn't be done during Abe,s reign it will not be done now.... Admit it's a pie in the sky and retire already Kuroda , the only inflation in Japan of late has been the " bad" inflation of price rises without across the board wage increases ( not just in Toyota & et al) Stop impoverishing the average Japanese ever more, you have done enough of it already.

3 ( +5 / -2 )

Stop impoverishing the average Japanese ever more, you have done enough of it already.

Right on; if Kuroda is really an independent actor as he vehemently professes:

"Our independence is guaranteed by law in conducting monetary policy and operations. Therefore, the BOJ is not a corporation whose management is controlled by the government," Kuroda said in a question and answer session.

Provide that QE monetary easing to the Japanese people for broad-based prosperity.

https://www.businessinsider.com/universal-basic-income-guy-standing-quantitative-easing-2017-1

1 ( +2 / -1 )

Wishful thinking that somehow Japan is different and inflation will not take off here as it has elsewhere. Plays into that narrative that Japan is somehow unique and special. Total BS, and shows the BOJ is not really independent. Inflation is increasing right now and the BOJ knows this. Stagflation is something the politicians are willing to accept. What they do not want to see, or be part of, is rising interest rates which will increase costs of Govt borrowing and thereby reduce spending, and drive many indebted companies to the wall. Expect the yen to remain weak and anything imported to cost a lot more.

0 ( +2 / -2 )

Ok just my humble opinion.

Japan debt to GDP is 252%

So, lets discuss debt servicing, MOF projections. over a five-year period, debt servicing worth 24.3 trillion yen for the next fiscal year, would hit 28.8 trillion yen in fiscal 2025. All the number were presented to the lower house budget committee.

Bank of Japan' primary role is to effectively bankroll public debt roughly twice the size of Japan's economy.

So where does the money come from?

That has to be financed by the taxpayer, a quarter of this year’s fiscal state budget some 107 trillion yen.

Of course, not all public debts are similar, A large proportion of J debt is domestically held.

So, this mountain of debt falls on the Japanese people, bondholders, banks, various corporations, pension funds, saving etc.

JeffLee theory, is If the debt carried no interest, J government could simply decide never to pay it back, the Abe roll over on each bond, without harm to the economy.

Simple, yes, well not quite. At present the interest 0.1% for 10-year bond yield appears feasible. However rising commodity, energy, and food prices, plus geopolitical risk Ukraine, could change the playing field.

The debt mountain hasn’t subsided.

The debt-to-GDP ratio continues to grow, the public, pensioners, savers, confidence could wane in the taxpayer’s ability to consolidate interest payments.

If a defined fiscal limit were reached, interest rate could spike, leading to an immediate default.

Let’s be clear economists cannot determine where that fiscal limit lies.

No country ever of similar economic output, wealth has ever defaulted. Every J bank, financial institutions, insurance companies, pension funds would become insolvent within days.

The yen would collapse, which would bring into question how the country would meet costs for imported food/energy.

You borrow it, you one way or another have to pay it back. Roll over? It begins to look like rolling under a tram

There a number of options that could move shift the burden. one should be seated for this, wealth redistribution/tax hikes. All would be unprecedented and politically unsustainable.  

Another thought is Japan’s foreign currency reserves.

-1 ( +1 / -2 )

JeffLeeToday  08:44 am JST

Abe said Monday the government could roll over its debt when the repayment deadline comes because it is a government subsidiary that can purchase debts.

*I hate to agree him, but that's technically true. The BOJ, as owner of the securities, could even cancel/void them if it wanted to, and nearly half of Japan's fiscal "debt" would disappear in a second. This is why Japan is not Greece, Argentina, etc. and can keep issuing debt til the cows come home while maintaining low inflation and and very low interest rates.*

Many other countries aren't so lucky.

Dude, reading your contradictory posts from one article to another are a real hoot.

Here is what you posted on May 11th

JeffLee

May 11  10:37 am JSTPosted in: Japan FY2021 long-term debt hits new high above ¥1,000 tril  See in context

without any plan how to reduce and pay it.

They could get the BoJ to buy the debt. Oh, they've already been doing that for years.

Another point to the yen's slide

How? Why?

the government will have to pay it back

*To its own institutions, like the BOJ and the govt pension fund, and its own residents, giving them more yen income, aka "stimulus."*

By cancel / void the securities you would obviously ruin all residents having invested in them, plus the J-banks, investment / securities and insurance companies which also buy them up. It is called a "default"!

Depending on the article, you either go: "Japan is a safe haven, everybody invests in Japan", or "debt is hold by Japan only" so no dependency on foreign nation or pressure from them.

Again, you cancel all securities held by (foreign) investors, it is called a d-e-f-a-u-l-t! Ask Argentina or Greece to understand what this implies.

You're a real piece of work, are you...

0 ( +3 / -3 )

I hate to agree him, but that's technically true. 

It’s not technically true, it is factually and technically false. Only in MMT fantasy land is that the case…. And folks stopped talking about MMT these days…

0 ( +2 / -2 )

@fxgai

Most developed countries have been operating under MMT fantasy rules throughout the pandemic, dishing out endless amounts of public money.

They may be starting to get nervous, realising that they are setting a precedent. Anaesthetising the masses to the inevitable economic pain with cash borrowed from their kids as they take down chunks of their economy, sector by sector, and all with no viable Plan B. Deglobalisation is as seismic as Mao's Cultural Revolution and is likely to work about as well.

They may also be realising that they no longer control their own economies. Deglobalisation moves all economies away from maximisation and low costs to minimalisation, high costs, shortages and famine. Brexit for everyone - no opt outs. Tweaking interest rates will not stop consequences like rampant inflation and the social and political carnage that inevitably follows. They have started the snowball rolling down the mountain because it seemed like a good idea at the time. Reality will hurt.

Why are the BoJ continuing? Having addicted the Japanese markets to monetary easing, they may fear the consequences of the withdrawal symptoms. Or perhaps they will continue until the Japanese state owns all of Japan Inc. - the ultimate act of nationalisation by stealth and a curious mash-up of communism and capitalism. Jgov eats Japan Inc. like Pacman eating all the ghosts.

1 ( +1 / -0 )

@Blue

By cancel / void the securities you would obviously ruin all residents having invested in them,

Me and ABe-san are talking about the bonds, ie, "debt" held by the BOJ, a public sector institution. There are no creditors or investors who would be ruined.

You're a real piece of work, are you...

Your inability to grasp simply concepts - yet having strong opinions about them - make you the real piece of work.

@ rocknroll

....J government could simply decide never to pay it back,

Again, the bonds owned by the BOJ. Any "paying back" (coupon payments) go back to the MOF. Thus the BOJ can throw all their bond certificates in the incinerator. There is no one making any claims on these securities (creditors). Poof, and nearly half the debt is gone.

1 ( +2 / -1 )

Japan won't go bankrupt but it will become like Zimbabwe and Weimar Germany.

JeffLee forget the last important point because Japan is poor in resources and labor. It will not face same problems as Greece but it is likely becoming North Korea in the long term.

-4 ( +1 / -5 )

Japan's core consumer price index, excluding volatile fresh food items, was up 0.8 percent in March from a year earlier and is projected by the BOJ to gain 1.9 percent in the year to next March.

Well . . . that was then.

And this is now:

The Producer Price Inflation (PPI) in Japan now shows MoM an increase to 1.20% in April, up from 0.80% last month (which was also the consensus percent for this month).

PPI YoY increased 10% in April over the same month in the previous year. Previous was 9.5%, and consensus was 9.4%.

Reminder: PPI reflects changes in the price of goods and services sold by manufacturers and producers in the wholesale market during the reported time period.

2 ( +2 / -0 )

@JeffLee

Spot on. Japan is not on the same boat. Though I hope it's not going to race off and leave asset poor people behind like during Heisei.

Already, Toyota and other Japanese automajers are talking about taking back the lead...like during Heisei. Anyone fancy paying ¥200k/month for a single bed studio?

-1 ( +2 / -3 )

@Septim

Japan won't go bankrupt but it will become like Zimbabwe and Weimar Germany.

Zimbabwe's real economy collapsed in one fell swoop. Its monetary and fiscal crisis was symptom, not the cause of its problems. If you seriously expect Japan to quickly collapse based on economic fundamentals, then you need a serious reality check.

Weimar Germany owed foreign currencies and gold. Japan has no such obligations. How many times must I point this out.

1 ( +3 / -2 )

Thus the BOJ can throw all their bond certificates in the incinerator.

Yeah yeah. And what happens to the other side of the BOJ’s balance sheet should they lose their minds like that?

There is no free lunch.

-2 ( +0 / -2 )

In case the reader wishes to see the BOJ’s balance sheet, and locate their own yen in it, see here:

https://www.boj.or.jp/en/statistics/boj/other/acmai/release/2022/ac220510.htm/

Note that the “balance sheet” has balanced liabilities and assets, and that those bonds that some think can be incinerated reside on the other side of the balance sheet to the yen in the wallets and purses and under the futons of the Japanese populace.

Heaven help them should their central bank incinerate their “assets”….

-2 ( +0 / -2 )

Zimbabwe's real economy collapsed in one fell swoop. Its monetary and fiscal crisis was symptom, not the cause of its problems. If you seriously expect Japan to quickly collapse based on economic fundamentals, then you need a serious reality check.

My example with North Korea is more about resources. If a war in Taiwan occurs soon, the US will force Japan to defend Taiwan. China will retaliate with vengeance economically first.

The economic punishment against Japan's access to resources is good enough to cripple Japan. Weak Yen also adds more salts to the wounds.

-4 ( +0 / -4 )

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