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BOJ could wipe out bets on July easing

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By Leika Kihara and Lisa Twaronite

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The BOJ has already implemented negative interest rates and is printing 80 trillion yen ($750 billion) a year to stimulate inflation after decades of deflation and stagnant growth, yet inflation

When do I get a slice of 62.5 billion USD per month?

-1 ( +0 / -1 )

"and is printing 80 trillion yen ($750 billion) a year"

No, it isn't. The BOJ is buying assets worth that much, in exchange for issuing yen credits in the accounts of institutions at the BOJ. No "money" is being "printed.." That's why we dont have huge inflation. And that's why all the scare-mongering over QE turned out to be wrong.

-6 ( +2 / -8 )

@MichaelBukakis Start your own company and issue your own bonds. That QE funding will be along shortly......

0 ( +1 / -1 )

That's why we dont have huge inflation. And that's why all the scare-mongering over QE turned out to be wrong.

You have no idea, do you? We do have inflation, just take a look at the stock market. A doubling in share prices during a period of net GDP growth of only 1% is a rather obvious sign. That currency does not all remain in the accounts of the BOJ, it is loaned out to the commercial banks, which in turn loan it to companies, who in turn buy stocks, inflating the prices.

And then there is the fact that the population continues to decline by hundreds of thousands each year, which drives down consumption, demand, and inflation. In addition to this, there is also the fact that in uncertain economic times, Japanese people spend less. The formula doesn't work in Japan as it would work in other countries which have growing populations, and therefore growing demand.

When the stock bubble eventually bursts, which it must do as it is over-leveraged, and growth remains stagnant, you will see the effects of QE. The BOJ has no more medicine to use, and the patient is no less sick than when the treatment began. This is all much like the housing bubble and recent economic collapse. But instead of housing prices being pushed absurdly high due to low rates and the trading of mortgage-backed securities, low central bank rates and QE is pushing stock prices to absurdly high levels. The only difference is that the real estate in America was a more tangible asset than the paper value of the companies buying their own stocks, being bought with the paper being pushed out by the central bank.

3 ( +5 / -2 )

Jeff, this is kind of the same as printing money, no? We don't have inflation because of a number of other factors, not least that all that money is just sitting at the Central bank. anyway, BoJ really doesn't have much room to ease more. Up to Honest Abe to relax fiscal policy (??) and spend spend spend

3 ( +4 / -1 )

No, it isn't. The BOJ is buying assets worth that much, in exchange for issuing yen credits in the accounts of institutions at the BOJ.

That's what printing is.

All the newly issued government debt ends up at the BOJ, which is equivalent to the outlawed practice of money printing to finance government spending.

To get around the law, the government sells debt to the primary market dealers, who then sell the debt on to the BOJ in the "BOJ trade". The mechanics are different from direct financing, but the results are the same except the primary dealers are also rewarded with profits for their complicity in it all.

No "money" is being "printed.."

In this day and age, people can use their "money" via electronic means, don't you know. There is nothing more inherently worthless about paper than numbers stored in databases.

And that's why all the scare-mongering over QE turned out to be wrong.

Nothing you mentioned supports that conclusion, and whether it does turn out to be right or wrong will be judged after QE is finished, when the BOJ balance sheet has been wound back down in size.

Meanwhile, QE has been so poor in achieving its ostensible aim of economic growth that the BOJ has not even been able to step towards an exit from the policy. The BOJ doing QE in the first place has distracted Abe's policy makers away from their responsibility to improve the environment for business through reforms.

It hasn't been worth it so far, and I'm not expecting it to suddenly start working as hoped any time soon either.

3 ( +4 / -1 )

"just take a look at the stock market."

That's asset inflation. I was talking about price inflation. Next.

"When the stock bubble eventually bursts...."

there wasNO QE in the leadup to stock meltdowns in in Japan and the US. You talk about things that havent happened. I talk about things that DO actually happen.

"whether it does turn out to be right or wrong will be judged after QE is finished,"

It has already finished in the US. So tell me about the problems it caused. Well? Go on, then.

-5 ( +1 / -6 )

No QE hasn't finished in the US. They have stopped buying more debt, but the whole operation hasn't been unwound yet.

In any case the US hasn't done as much QE as Japan has done to start with, so even if the US episode ends well that's no guarantee that the same will be true in Japan.

1 ( +3 / -2 )

That's asset inflation. I was talking about price inflation. Next.

Do stocks not have a price? Is this price not affected by the money supply? It rather obviously is.

Stocks, or capital stock, the goods which are produced, bought, and sold, are all assets, and all assets are as subject to inflation as anything else. Were the demographics in Japan positive, the inflation in the stock market would immediately trickle down into into capital stock, consumer prices, wages, etc. But with Japan's demographics making positive returns on the sale of goods, or increased demand for products, such isn't the case.

There is not a lack of liquidity in Japan, which is the only real reason to start printing money. There is ample money, but no place to spend it and earn a return.

Companies began buying stocks because they believed Abe would deregulate the economy, which would create an environment of positive returns. But Abe hasn't done what his is promised, so the companies have fat stock portfolios with a high value on paper. But without any place to invest this money in Japan, and no future prospects, these stock prices aren't worth the paper they are printed on. Unless the government continues to continue to pump up the markets with cheap money, and companies continue to roll the money around in the market, the entire mess will collapse.

Next.

0 ( +2 / -2 )

I hate the term "helicopter money", but Kuroda just saying that it wasn't coming (which it probably eventually is as I can't see how the J govt. EVER repays its debt) moved dollar/yen 130 bps. Imagine if either Kutoda or Abe's next "plan" to "revive" the economy is seen by "the market" as being insufficient. dollar /yen goes to 100, Kuroda uses that as an excuse to intervene, The Donald berates Japan for being a currency manipulator. Personally I would be buying gold sometime over the coming months. good for fear and good if inflation does eventually strike.(and especially when BoJ eventually monetizes some or all of the J govt debt mountain).

0 ( +0 / -0 )

Diminishing returns on weakening. To some degree more liquidity has changed to inelastic demand. New investment to increase capacity relies on an increase in underlying demand, there continues to be a decrease in demand due to a lack of increase in wages, greater taxes, and declining population. Monetary policy has hit its limits in terms of its ability to stimulate growth in the absence of demand. Only through spending, government or personal, will demand increase creating the need for more capacity and investment. They must know this as they are far more educated than I so I imagine that they have different motivations than those stated for general propaganda consumption!

0 ( +0 / -0 )

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