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BOJ loses bark and bite under Kuroda

15 Comments
By Leika Kihara

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15 Comments
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Wow! These guys at the BOJ even get paid for failing-what a cushy job! I remember getting it wrong and being sacked a few times.....

1 ( +2 / -1 )

The BOJ admitted there was no direct link between the pace of money printing and inflation expectations in the short run.

The reason the BOJ's "money printing" completely failed to generate inflation is because the money being created by the BOJ didn't get into the hands of the low to middle class citizens who would have spent it. Instead, through quantitative easing the newly created money wound up in the hands of the 1%. In theory, the money was supposed to trickle down, but as with all other trickle down strategies it stayed put in the hands of the super-rich.

It would be easy for the BOJ to generate some inflation — simply take a direct approach rather than relying on indirect mechanisms. Create money and put it directly into the hands of Japan's citizens/residents across the board. Helicopter drop. They will spend the money once it is in their hands. Wash, rinse and repeat until 1% to 2% is reached.

6 ( +6 / -0 )

It has been clear from the start that Kuroda was out of his depth running the BOJ. By paying over the odds for government bonds he has ensured the BOJ will suffer massive losses in the future whilst his negative interest rate policy is bankrupting local banks.

0 ( +2 / -2 )

I believe yen,after Kurosawa announcement will be spiked high to more damaging and dangerous levels,putting Bojin the corner,having no choice but QE.Anyway,never say never,and expect the unexpected.Yes,I agree,if money doesn't go to Japanese citizens,waiting for inflation will be no more than waiting for Godo))!.

1 ( +1 / -0 )

@Sensato

Exactly!

Unfortunately, the politicians with the power to fix inequality never do. To do so would be democratic which is not how the corrupt system works.........

2 ( +2 / -0 )

Just hope Kuroda is replaced by someone who knows something about economics. Kuroda has been a disaster so far ...

0 ( +1 / -1 )

In a clear departure from his initial “shock and awe” tactics to jolt the nation from its deflationary mindset,

"Mindset" has nothing to do with it. Japan is in deflation because it is over-regulated, over-taxed, and over-priced. Because things are too expensive, people buy less, and have fewer children. When they buy less, companies earn less, and must pay less. When there are fewer children, there are fewer consumers, which leads to people buying less, so companies earn less, and pay less. There is no "mindset" involved in the problem. Printing, borrowing, and spending do not address the cost-of-living issue, and neither does zero interest rates.

Japan needs to restructure it's economy, and that is out of the BOJ's hands.

4 ( +5 / -1 )

"In theory, the money was supposed to trickle down...."

That's because Japanese companies and consumers continue to be in a risk-on deleveraging mood. The BOJ put the ball in the private sector's court a long time ago. It's not the BOJ's fault that risk-adverse business managers have decided they don't want cheap capital and are hoarding their cash instead of paying their workers properly.

"I remember getting it wrong and being sacked a few times..... "

"Getting it wrong" would be hiking interest rates, triggering a deep recession. The BOJ has done the opposite, drastically lowering rates, making financing easily available to the private sector, without any inflation or any other risks, which lots of people warned about but have been proved wrong.

The BOJ got that part right, but hey, it makes a convenient scapegoat.

1 ( +2 / -1 )

"In theory, the money was supposed to trickle down...."

That's because Japanese companies and consumers continue to be in a risk-on deleveraging mood. The BOJ put the ball in the private sector's court a long time ago. It's not the BOJ's fault that risk-adverse business managers have decided they don't want cheap capital and are hoarding their cash instead of paying their workers properly.

Which is just more proof that trickle down economics doesn't work.

1 ( +2 / -1 )

No, Jeff. The BOJ controls the money supply and as a result can lend to whoever and at whatever rate it wants. Several years of easing have failed to counter deflation and the bank is now reviewing its own failed stimulatory strategy. Why is a private loan so expensive in Japan? Private lending companies can take advantage of the extra money by approving a loan in as little as 10 minutes. Yet, an employed Japanese cannot get a bank overdraft from their own bank, even having been loyal customers for many years!!!! I question how companies in the sarakin world are able to take advantage of many millions of Japanese, charge them inflated rates for borrowing when the BOJ has inflated the money supply twice over in several years. There is obviously a market for cheaper personal loans in Japan which is not being addressed.

Could the BOJ be doing more to help the people needing more help, by reforming bank policy?

Of course it could!

3 ( +3 / -0 )

"BOJ controls the money supply and as a result can lend to whoever and at whatever rate it wants."

Ah, no. The lending to businesses and consumers is done by commercial banks, not the BOJ.

"Why is a private loan so expensive in Japan?"

Because consumer loans are expensive everywhere in the world? Those consumer rates are set according to the rules, decisions and policies of the lenders themselves. The BOJ is offering THOSE lenders the lowest rates in history. So gimme a break.

"Which is just more proof that trickle down economics doesn't work."

I didnt say it does

1 ( +2 / -1 )

Are you really saying that the BOJ doesn't control the money supply?

Of course it does!

The interest base rates are set by the BOJ right!

Commercial banks are the places dispense it to us mortals but as for control......,

The BOJ with the government can choose to issue,revoke and implement the control of money in any way they see fit.

Doesn't that seem omnipotent enough?

1 ( +2 / -1 )

"Are you really saying that the BOJ doesn't control the money supply?"

NO, I'm correcting your claim the BOJ lends "to whoever it wants."

"Commercial banks are the places dispense it to us mortals but as for control......,"

And who gets the loans and under what terms is up to commercial banks. The benchmark rate is set by BOJ and is the lowest in history, and you're blaming the BOJ it for "expensive loans." Your argument makes no sense.

0 ( +1 / -1 )

Ok, so how do you explain the bubble that occurred back in the seventies and eighties? Wasn't that direct central planning policy?

Of course it was.....

2 ( +3 / -1 )

"Ok, so how do you explain the bubble that occurred back in the seventies and eighties?"

Japan's economy performed brilliantly in the seventies and eighties. You appear to be delusional.

YOu mean the Japan bubble in the 90s? That was the opposite of "central planning": the real estate and mortgage lending sectors were on a loose leash and going crazy with speculation and bad loans, (and not enough oversight by the authorities)

As for America in 2008, that was the opposite of "central planning": the unregulated mortgage lending and commercial banking sectors were unleashed and going crazy giving out bad loans and selling securities laced with toxic private debt. And not enough oversight by the authorities.

0 ( +0 / -0 )

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