business

BOJ expands asset purchases to Y80 tril to spur recovery

24 Comments
By ELAINE KURTENBACH

The requested article has expired, and is no longer available. Any related articles, and user comments are shown below.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

©2021 GPlusMedia Inc.

24 Comments
Login to comment

The central bank said the monetary loosening would continue as long as needed to attain an inflation target of 2%. Good grief! Hasn't this goal been achieved already? Prices are shooting up everywhere ... with many of them passing their previous value by more than 2%. Can't figure these monetary experts out. They are already bleeding us of our hard-earned money ... and they want even more.

From the way the above story reads, my interpretation is that here comes the added 2% consumption tax increase whether we like it or not.

8 ( +9 / -1 )

It won't work. Creating assets which are then purchased using money borrowed from the taxpayers at interest, which must be repaid is not how you "spur growth". It is like drilling holes into the bottom of a sinking ship to let out the water.

Growth occurs when there is demand, demand occurs when people buy things. People buy things when they can afford to buy them. They can afford to buy them when the prices aren't jacked up by taxes, tariffs, and price-fixing. When they can't afford to buy things, then they don't, and when they don't, the stores and factories don't make the things, and when the factories don't make things, they have to cut jobs, reduce hours, or leave the country.

8 ( +12 / -4 )

One of the adverse side effects of QE in Japan, the EU and the U.S. alike has been a redistribution of wealth from the middle classes to the extremely rich. They have been feathering their nests with the easily available low interest cash, while average salaries edge lower for the average Joe. Theoretically, the wealth is supposed to be trickle-down, but obviously it never does.

One troubling statistic as evidence for this trend is that the number of billionaires has doubled since the financial crisis hit (followed soon after by aggressive central bank QE programs), according to CNBC yesterday.

6 ( +7 / -1 )

The yen is now well into the 111 range, it's great! Really hope for continuing freefall with all the profits we can amass. Cheers japanese government!! Down down down please! For the japanese economy I shudder to think about the future. Frightening

-4 ( +4 / -8 )

Pour more money into the banks who in return poor it into the stock market, the average person sees none of it yet pays for it.

The trickle down effect does not work, money does not flow like water, it will not flow down.

However if these idiots dropped this money into the citizens pockets some would spend it on luxury items, some would pay off their loans, some would save it , some would buy shares, some would drink down the pub, but every time some one spent their stipend the govt would be able to collect the sales tax off it, this is truly stimulating the economy and the money would flow up to the top, It would get to where it is being dropped now, but average guy would see some benefit or respite, the sales tax would be more, the economy gets to turn and the money would eventually end up back at the top.

Imagine this, the rich banker uses his profit to go buy a lamborgini , the sales man at the dealer gets a boost goes wooohoo spends his small commission the end.

Drop it into the publics pockets, they spend it at the conbini , the conbini guy spends it , the place where he spent it goes and spends it and so on and so on.

7 ( +10 / -3 )

Friday before a long weekend - nah, that couldn't have anything to do with it!

2 ( +2 / -0 )

People buy things when they can afford to buy them.

And also when they aren't afraid about their future. People will save for their retirements when they don't trust the government to be able to look after them when the time comes. The government's horrid debt mountain is a factor here, can't be ignored. Japan is between a rock and a hard place, no easy ways out.

the stores and factories don't make the things

At least on this part retail sales were up in September as was the volatile industrial production, so perhaps too soon to despair on those points.

Sensato, yes indeed. The biggest driver behind inequality in recent years has been this ridiculous policy of central banks bankrolling government spending.

umbrella, Good Trading :)

5 ( +6 / -1 )

"The government's horrid debt mountain is a factor here, can't be ignored."

Why not? What exactly are the (concrete, specific) repercussions?

Again, the authorities need to compensate for damaged inflicted by the consumption tax hike and the further hike along the road. Life would have been so much easier without it, for us as well as for them.

-3 ( +1 / -4 )

@Edojin

Don't you know...the way they calculate inflation isn't the same as we do.

1 ( +1 / -0 )

Household incomes, meanwhile, fell by 6% from a year earlier in real terms, excluding inflation.

So to include inflation means that it dropped roughly 8%?

This is going to haunt Abe in the long run. He has been pushing for higher wages, and some companies increased bonuses but NOT actual wages. The bonus increase was window dressing, the consumers here DO NOT spend cash in a poor economy, that is a historical fact about Japan.

Stocks may rise, but that hardly trickles down to the average worker. Haves vs have-nots...the gap ever widens.

3 ( +3 / -0 )

Think panic might be setting in, working people are getting crushed and not spending the Government are buying its own debt increasing the country's debt. Guess a stomach disorder is to be expected soon.

0 ( +2 / -2 )

Two months ago, I predicted that BOJ will do anther fresh batch of quantitative easing to boost Japan's sagging growth , even though BOJ then kept saying to the public that there was no such need.

The markets are definitely like the flow of cheep money, but the wider implications for many areas will remain to be seen for months down the road.

-1 ( +1 / -2 )

This only confirms that the tax hike will go through in Oct '15. The government should buy sh** load of cheap oil NOW to tame energy costs now and through immediate future. This might leverage pain of tax increase. Good Luck to the Japan. .

0 ( +1 / -1 )

2% inflation is desired by the japanese "government". But as we all know, the actual inflation rate is way higher than that. It's disguised inflation in that all goods have got substantially smaller. Such as weight down, number of biscuits or cheese slices etc become fewer or the volume of a coke can drops from 350 to 300cc. What usually happens is that the package is "redesigned" in some way and then thrown back onto the market. Companies think the little people are so dumb they won't notice.

It's a good job for the powers that be that the japanese people are so well controlled, docile and apathetic. Anything can be done to them and they will not protest. Won't be any Hongkong style protests in japan. They are too busy looking at their phones and adjusting their hair.

Hard to see the economy ever recovering. There's just no way with the ever increasing aging society. Bleak indeed!

4 ( +4 / -0 )

Banzaï….!

0 ( +0 / -0 )

sangetsu03 and StormR -- brilliant comments. Since most Japanese people have their savings tied up in Japan Post savings accounts, unlike the U.S. where particpation in 401k's and mutual funds is very high, this policy will have little or no impact on them. The 5% increase in the Nikkei is meaningless, because, again, unlike the U.S., consumers in Japan simply don't incur credit risk as their overall economic situation improves -- they spend cash. And asset purchases, and inflation goals, and increases in the consumption tax do not put any more cash in their pockets.

0 ( +4 / -4 )

We keep hearing of japans debt and the bond buying etc, etc and the sky is falling blah, blah, blah,, but did some, or any of you, know that Britain still carries debt 100 years after the first world war, yes that is right 100 years. They owe billions and have actually just paid part of it today. Note this is for the first war only and does not include its debt for the 2nd world war.

So if it is ok for Britain to owe billions for 100 years then why cannot japan carry some debt for awhile, after all it owes it to itself no one else.

Please Mr economists on here tell me why ?

Things are not as grim as some would have you believe, a lot if it is trick or treat and this is a treat this stimulus today, although some think its a trick lol.

-3 ( +3 / -6 )

StormR totally agree, its not good having that debt but if UK US can owe $trillions. why cant Japan owe money to itself, if the US can print $5trillion in money out of thin air backed by nothing, then why is it bad for Japan to print Yen, which they own. cant say id like being in the EU since many countries share one currency, and the stronger ones get pulled the weaker.

0 ( +1 / -1 )

In the end this is simply a mechanism to transfer money from savers to borrowers (by a strange coincidence, the government is the largest borrower) while simultaneously driving private savings out of government bonds into more productive (and risky) assets.

It is a policy of desperation, with a pretty good chance of disaster.

On the other hand, because of the incompetence of Japanese governance over the last fifty years, the only alternative policies (and there are very few) carry almost a certainty of disaster.

Best chance to make money is, buy real assets - stocks, commodities, real estate - and borrow like crazy. In other words, act like the government and the BoJ will accidentally bail you out as they intentionally bail out the government.

1 ( +2 / -1 )

Much better for taxpayer money to go back to taxpayers. They then pay off any debt to the banks, keeping both afloat. Anything else is a sellout. When things so sideways sadly taxpayers will have to pay up yet again. Cycle. Repeat.

2 ( +2 / -0 )

So if it is ok for Britain to owe billions for 100 years then why cannot japan carry some debt for awhile, after all it owes it to itself no one else.

Because Britain's debt is less than half of Japan's as a proportion of GDP, and also because Britain's population isn't falling by 6 figures each year. In addition to this, Britain's markets are more or less open, and Britain's competition laws demanding a fair playing field for businesses and consumers are strictly enforced. And because much of Britain's debt is owed to outsiders, it is a point of honor to manage the economy in a way which does threaten those who have invested in the country. Do you think they would be buying Britain's bonds in Britain were in the same economic shape as Japan? Hardly.

-1 ( +2 / -3 )

JeffLee,

Why not? What exactly are the (concrete, specific) repercussions?

[... of the government's horrid debt mountain]

An obvious one is that concerns about the sustainability of the government's finances has the effect of driving people into precautionary saving. (Not you personally, obviously, but it does have the effect on others)

StormR,

Not sure if you mean the UK issued 100 year debt or what, but at the end of the day it's not the size of the debt alone that matters. If I have a 10 million dollar debt does it mean I'm broke? Not if I earn 5 million dollars a year, right?

Japan's economic growth hasn't been matching it's rapidly increasing debt load, and this has been going on for a good while now. Will it continue forever? What does thousands of years of history suggest?

How does the size of the UK debt versus it's ability to service it weigh up against Japan's? I'd hazard a guess that the dynamics in Japan are worse.

Of course, the BOJ can always just buy all the debt. But that has it's side effects, as the circa 3% crash of the yen against the dollar in a single day showed.

Or does someone want to tell me that it's a coincidence and it's just the yen continuing to correct from it's excessive strength? Already some 50% off it's highs against the dollar, I'm not buying that one.

0 ( +0 / -0 )

Buy gold and silver before this gets out of hand.....

-1 ( +0 / -1 )

Japan’s central bank expanded its asset purchases in a surprise move Friday to shore up sagging growth in the world’s No. 3 economy.

A colossal, profane waste of money.

Investment, trade, consumer spending, entrepreneurship-these things spur an economy. BOJ's asset purchases won't lead to any of these things.

PM Abe and BOJ governor Kuroda have a very poor knowledge of economics (I often wonder if they even believe in a free market economy).

If the government is serious about boosting the economy, it needs to get off people's backs, and out of their pockets. It has to free up the economy with some reasonable de-regulation, tax cuts, and trade.

Buying back bonds doesn't create jobs, or higher incomes; it doesn't get people out there spending money in a "virtuous cycle of consumption".

0 ( +0 / -0 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites