COVID-19 INFORMATION What you need to know about the coronavirus if you are living in Japan or planning a visit.
business

BOJ to stand pat even as goals depart from reality

35 Comments
By Leika Kihara

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

© (c) Copyright Thomson Reuters 2015.

©2020 GPlusMedia Inc.

35 Comments
Login to comment

The BOJ policy will MATHEMATICALLY reach "end game" around 2017.

3 ( +5 / -2 )

goals depart from reality

This is the legacy of Abenomics!

10 ( +12 / -2 )

Why not a goal of zero inflation and zero deflation?

Personally, I really do not need to buy anything useless at the moment either.

5 ( +5 / -0 )

Just what benefits have accrued for the average Japanese voter? The answer is absolutely nothing! While companies make use of cheap cash and cash in over inflated stock options to go on overseas buying sprees the average Japanese is becoming poorer and poorer...

4 ( +5 / -1 )

With inflation and growth still in the doldrums despite the bank’s 80 trillion yen ($665 billion) per year asset buying measures, they said the board had grown increasingly concerned about their diminishing policy options and the downsides of the stimulus, such as draining liquidity from the government bond market.

Yup, basically 80 trillion yen spent, and nothing to show for it. Great job Abe and Kuroda. You made the worst possible mistake civil servants can make, you let your own egos get in the way of making sound policy decisions.

0 ( +4 / -4 )

The reality being Abenomics has killed the middle & lower classes - the working majority that keep this country going...

3 ( +4 / -1 )

“There’s not much the BOJ can do to respond to overseas headwinds,” said one source. “What’s important is that domestic demand remains firm.”

"Abenomics" does not No simple Mathematics I think and say that currently Japan really have a good economy. Make the yen cheaper making Japanese poorer, get more fund from the added tax and as a result higher prices on commodities. Raising the tax does not affect only rich people here, its domestically universal. These are all detrimental at all. These does not add to raise every people`s life here.

0 ( +0 / -0 )

@sighclops

"The reality being Abenomics has killed the middle & lower classes - the working majority that keep this country going..."

I don't know how long you've been here, or if you're in Japan at all but thats not true. It wasn't at all rosy for the middle class during the DPJ / delfation days/ The reality is that the deflationary cycle was killing the middle class, and Abenomics is failing to revive them.

-1 ( +2 / -3 )

No national policy, either fiscal or monetary will help this country anymore. Japan needs external input like immigration.

0 ( +3 / -3 )

What Japan needs is not inflation nor deflation - what Japan needs is economic growth.

More than central banks' 2% inflation targets, what is needed is for governments to pursue long term sustainable economic growth targets of 2-3%.

The endless short term "fiscal stimulus" packages that Japan's has pursued haven't generated growth, only a massive pile of public debt that makes a lot of people scared about what the future holds.

The government needs to enact growth friendly policies one after the other and keep going until growth does pick up. Those policies won't work overnight, but they would have positive psychological effects that last longer than easy money.

2 ( +5 / -3 )

Easing now would run counter to the government’s policy priorities, government officials say.

I can only guess what those priorities are. Helping the nation and people of Japan doesn't seem to be among them, while hanging on to power does.

1 ( +2 / -1 )

I have read again and again that at least Abe is doing something... Yeah he is, with little of it good for most Japanese people.

1 ( +2 / -1 )

"basically 80 trillion yen spent, and nothing to show for it."

In macro economic terms, maybe not. But the BOJ used the money to buy assets from the commercial banks. The BOJ's balance sheet, filled with these assets, is the thing it has to show, given that it's an asset swap we're talking about.

"massive pile of public debt that makes a lot of people scared about what the future holds"

"Scared"? Then why aren't bond rates skyrocketing, the yen crashing and gold shooting upward? These are all the things debt hawks predicted. Why have they been so consistently wrong, I wonder.

0 ( +5 / -5 )

If you want some insights into the way the BOJ operates, following US neoliberal ideology, and the history of BOJ's attack on Japanese social stability, see the following documentary.

Princes of the Yen: Central Bank Truth Documentary 『円の支配者』 https://www.youtube.com/watch?v=p5Ac7ap_MAY

0 ( +3 / -3 )

In a nutshell:

"Genro" is a term to be familar with.

https://en.wikipedia.org/wiki/Genr%C5%8D

TLDR: "Elder statesmen/ founding fathers/ the patriots/ of modern Japan.

in the late 1800's, these homies took alllllll the confiscated Tokugawa assets and used them to make an industrial base of factories, railways, mines etc... Then, these all became privatized in a very specific and selective manner. The big 4 "zaibatsu" conglomerates which were of course, run by A Genro or a family member or someone with personal ties to these dudes.

These zaibatsu were (and still are) like aircraft carries of commercial empire, self contained with their own factories, banks, insurance companies, export agencies etc..

Sumitomo, Iwasaki, Yasuda and Mitsubishi. The four horsemen. These massive commercial empires were all headed by the elite, often with ties to royalty, politics or the military. These companies werekept together through networks based on connections, marriage, bid rigging, bribery, school ties that would enrich all these mo'fo's PERSONALLY as Japan developed into a "modern" industrial economy.

There has NEVER been any truly effective measures to reign in the elite/superwealthy or to try and make any attempt at reforming the financial system because this would simply NOT benefit the elite.

systematic corruption, bid rigging, "sweetheart deals" this has happened at LEAST twice in Japan's history leading to a bank crisis. 1927 and the late 90's Here is how it goes.

step 1. lend massive amounts of money from the biggest banks in Japan to businesses run by the same men or their relatives or associates.

step 2. Other elite/ wealthy families do the same thing giving a false impression of recovery or prosperity.

step 3. Banks don't actually SECURE these loans because when greasing palms, it's weirdly embarrasing to insist on security right?

step 4. Banks, of course do not audit their own conduct

step 5. Easy money, no supervision, no payment on loans, liquidity crisis haemorrhage, looming collapse of banks.

step 6. gov. forks out billions in emergency "loans" but ONLY for the express purpose of helping the privileged families who CAUSED THE PROBLEM IN THE FIRST PLACE.

TLDR: Banking in Japan is done in a way that benefits a small, elite group and this will never change.

3 ( +4 / -1 )

"Scared"?

Do you deny the reality that many people are scared?

why aren't bond rates skyrocketing

Bond rates aren't skyrocketing because the BOJ is buying more than (an unprecedented) 80 trillion yen of bonds per year, versus new issuance of 40 trillion.

Who knows what the brilliant plan is when the BOJ runs out of bonds to buy, but people aren't confident that this government - which can sure knock down an old national stadium but can't get a new one built on schedule - won't screw that up too.

0 ( +2 / -2 )

But household income is rising and underpinning consumption

July showed the first increase in real wages for several years, but only by 0.3% compared with the year before. This is hardly going to do much to underpin consumption. Kuroda has spent the last year lying about wages increasing when they have actually been falling, according to the monthly labor survey figures. Reality is far removed from the rosy picture he paints.

It's time for Kuroda to sit back and tell Abe to get on with the "third arrow" of reforms that Abe has been too scared to enact, wasting his time instead on passing illegal legislation.

1 ( +2 / -1 )

The problem is Japan never let the reality bubble pop properly; the Boj keeps trying to tinker with the economy and has failed for more then 20 years. On top of that reckless government spending by career politicians that never held a real job and dont understand economics.

I would rather see the free market work things out but that would require banks taking responsibility for their careless investments. We got to get pass this notion that banks failing is going to end the world. It would hurt for a while but the recovery would be quicker. But we live in a day and age where all governments are propping up their economies, not only the scape goat China.

1 ( +3 / -2 )

In macro economic terms, maybe not.

Yuh, but that was the whole point of it Jeff. So what if they managed to accomplish an 80 trillion yen "asset swap". That does not improve the economic performance of Japan in the slightest -- as shwon clearly by the contraction in the most recent quarter.

-1 ( +1 / -2 )

But we live in a day and age where all governments are propping up their economies, not only the scape goat China.

They are not propping up their economies, they are acting on behalf of large controllers of capital and facilitating ever greater accumulation and a class war that has seen income and wealth gaps widen around the planet. A lot more social unrest is ahead.

-1 ( +2 / -3 )

"BOJ to stand pat even as goals depart from reality". That is a really interesting headline as it implies their goals actually had some connection to reality in the first place. The "reality" here is that for 15 years they have been pursuing their "goals" while having a false understanding of how the monetary system works, using kindergarten level concepts like loanable funds and the money multiplier. And like all good ideologues and economists, when the evidence shows that reality is not behaving like their theory says it should they assume there is something wrong with reality. "QE not having the desired effect? We must not be doing enough of it! We must do more!!!". As for their "goal" itself, 2% inflation targeting is an idea that was dreamed up by the Bank of New Zealand in the 1990's, and the number 2 was chosen because it sounds good. Amount of actual analysis and observed real world evidence that went into coming up with the number was zero, as is the amount of evidence that people actually behave the way the "inflationary expectations" theory claims they will. The BOJ's goals have not "departed" from reality, they have never been there.

Do you deny the reality that many people are scared?

So what? Small children are afraid of the dark, does that mean people shouldn't go out at night? People are scared of what they are told to be scared of, the only questions here are who is telling people to be scared and why. What people claim is scary "massive debt" is actually the amount of yen currency that has been issued by the Japanese government over time and not been taken back in taxes. If it's high in total or in relation to GDP it is a symptom of economic weakness, not a cause of economic weakness. All governments issue currency when they spend, and if they don't spend there is no net money supply. Of course, that's not how it works in the fantasy land of economics textbooks but that's how it works in the real world. Get over it.

I would rather see the free market work things out but that would require banks taking responsibility for their careless investments

The BOJ and the Japanese government had three options when and since the bubble popped, in order of effectiveness. 1) Rescue everybody (real economy AND the banks) through a combination of debt jubilee and cash injections. That was the original concept of "quantitative easing" that was proposed and it was rejected for political, not economic, reasons. 2) Rescue nobody. Let the free market punish those who misallocated resources. While that would have made a lot of rich guys unhappy, it would also have been what free market theory says is supposed to happen. Of course, that is the one part of free market theory that free market "believers" always ignore, even though it is the most important part and the part that justifies using the theory as a way of organizing society. 3) Rescue the banks and not the economy by making the banks whole and protecting them from their losses while leaving the debts in place to drag down the real economy. Which is of course what they did. Because they are bankers, and no other reason

0 ( +5 / -5 )

So what?

It doesn't make much sense to expect people to consume and invest, if they are scared about the future.

What people claim is scary "massive debt" is actually the amount of yen currency that has been issued by the Japanese government over time and not been taken back in taxes.

Yeah, nothing scary about higher taxes in future. Everyone just can't get enough of that.

the only questions here are who is telling people to be scared and why.

Don't keep me in suspense! Who are the evil villains behind all these brain-dead people thinking that loads of government debt and consequent higher future taxes is something to be afraid of? Or do the people just have common sense?

-1 ( +2 / -3 )

Who are the evil villains behind all these brain-dead people thinking that loads of government debt and consequent higher future taxes is something to be afraid of?

@fxgai You aren't seriously dragging out that "Ricardian Equivalence" nonsense about higher taxes in the future to make your "case" are you? Even David Ricardo didn't take it seriously. Thanks for the laugh, and please send along more 200 year old economic "theories" to show us all what a 21st century financial and economic expert you are.

1 ( +3 / -2 )

Keynesian idiots at the helm.

-3 ( +1 / -4 )

Are the Japanese scared? Oh yes.

My office is in Tokyo's financial district ; across the street is the BOJ, across the tracks I can see the Nomura Building, the new Mizuho building, and over behind the Kitte building is MUFJ. There are countless offices for regional banks. I have been doing business with these people for the last 5 years. It has been interesting to see how they have felt and how they have reacted as the previous DPJ prime ministers fumbled through their short stint in power, and how their hopes have risen and fallen since Abe has entered the game.

Are these men scared? The junior people are oblivious, "Abenomics has turned Japan around". But the optimism is not shared by the more senior people. A good friend of mine who happens to be an executive with one of the "mega banks" told me some months ago "for the fist time in my life, I am afraid for the future". This was when the ECB decided to start it's QE program. A real estate executive who I had lunch with said "we expect things to go well enough until 2020". "What will happen after 2020" I asked. He answered me with a single word, "tragedy". A friend of mine who has worked closely with the LDP told me more than a year ago that "Abenomics is over", and it appears he was right.

Japanese companies are quickly divesting themselves from Japan, using what assets they have to acquire or team up with foreign business. International schools have three-figure backlogs on their waiting lists of Japanese families trying to get their children enrolled, these families have little optimism that their children will be able to succeed in Japan, and are trying to get them a ticket out.

Japan's demographics are a perfect example of how optimistic people are. If the people were more confident about the future, and were working successful careers with great hope for the future, then Japan's population would not be declining by some hundreds of thousands every year.

1 ( +4 / -3 )

. "What will happen after 2020" I asked. He answered me with a single word, "tragedy".

Did he bother to explain what the tragedy might be and how the unravelling would develop in detail, or was he trying to be dramatic? LOL. Note that 99.9% of predictions about economic collapse are wrong. Hardly anyone predicted the 2008 financial crisis. Michael Lewis with his extensive connections tracked down about 6 people who shorted CDOs ahead of 2008.

"If the people were more confident about the future,....then Japan's population would not be declining by some hundreds of thousands every year."

That's odd, Because low birthrates are associated with affluent and comfortable societies. If you want to see high birthrates and "good demographics," I suggest you take a look at most impoverished third world countries.

1 ( +2 / -1 )

You aren't seriously dragging out that "Ricardian Equivalence" nonsense about higher taxes in the future

No, I'm stating the obvious, common sense, that some people are afraid for the future because of what the government has done, and their actions are effected by it accordingly.

Japanese companies are quickly divesting themselves from Japan

Indeed this is what many individuals have been doing as well. Presented with the choice of investing in Japan where there has been no economic growth for 20 years and horrid public finances, or investing overseas where there has been constant economic growth, it's not hard to imagine where people see the favourable odds.

Any despite early expectations that Abenomics might be a break with tradition, it hasn't turned out to be a game changer, just more of the same coupled with a big depreciation of the currency.

Keynesian idiots at the helm.

I think they are only behaving like Keynsians because it's suits them politically. The LDP needs to dish out other people's money to the vested interests, and they went in search of an economic philosophy with which they could claim to justify it.

After years of economic failure you'd think the voters would have wised up by now.

-1 ( +0 / -1 )

"I think they are only behaving like Keynsians because it's suits them politically"

Actually, economically. It's a familiar pattern. Politicians spouting free market nonsense get elected, and then a few years later the economy or financial system melts down. Then they get the cold realization that the only solution is Keynesian in nature. Some admit it (Nixon) others not (REagan and his trillion dollar Pentagon budget)

"We are all Keynesians now" -- Quote attributed to both Conservative Republican Richard Nixon and free market godfather Milton Friedman

0 ( +2 / -2 )

The BOJ's stimulus plan was never going to deliver what the economy needed: confident consumers with more disposable income, and more investment in businesses, and entrepreneurial ventures.

What the government needs to do is change its heavy-handed, interventionist approach, and let consumers, investors, and businesses have a freer hand in managing the economy. Abenomics, stimulus packagaes: government show pieces designed to benefit few.

I know I stress this a lot, but, a free market approach is needed in Japan. It may not be the way things are done in Asia, but, clinging to interventionist traditions isn't going to lead to an economic revival.

0 ( +1 / -1 )

That "free market nonsense" JeffLee, would see Japanese consumers supplied with globally abundant butter on the local supermarket shelves.

-1 ( +1 / -2 )

No, I'm stating the obvious, common sense, that some people are afraid for the future because of what the government has done, and their actions are effected by it accordingly.

No, you stated that people are scared of government debt and "consequent" higher taxes in the future and that this is affecting economic behavior. That IS the theory of Ricardian Equivalence. A theory from the year 1820. Now, you try to shift the goalposts by claiming your junk, zombie economics is "obvious, common sense...because of what the government has done". It might sound a more reasonable line than the original one, but still lipstick on a pig.

investing overseas where there has been constant economic growth, it's not hard to imagine where people see the favourable odds.

Ah, now we enter deep into Japan Doomer fantasy land. "Something is terribly wrong with Japan and the structure of its economy. It needs REFORM and and change in its CULTURE!!!! Or it will die!!! Not like overseas where there has been "constant economic growth". LOL What planet are you even talking about? Reality check time. Every country is going down the same path as Japan, with the same deflationary dynamics and low growth as Japan, and with the same bogus economic theories claiming the answer lies in the "magic of the marketplace". Japan just got there first, and if you look at Japan on a per-capita GDP basis these "overseas" countries are in fact handling the situation even worse than Japan has.

But I know fxgai doesn't care about any of that, and I look forward to more quoting of 200 hundred hokum, and whatever other zombie economic cliches he wants to waste peoples' time with.

1 ( +2 / -1 )

No it's not the same as the theory of Ricardian equivalence but nice try pretending it is.

Japan isn't doomed, the crappy failed policies it has been pursuing in recent deals are doomed. Reality check - it is only japan that has failed to grow and arguing that other countries are destined not to grow as well is defeatist nonsense to cover for an unwillingness to admit the insanity of policies that have failed Japan for more than 20 years now.

-1 ( +0 / -1 )

"That "free market nonsense" JeffLee, would see Japanese consumers supplied with globally abundant butter on the local supermarket shelves."

"Butter"? The wealth destruction was about ten million times greater after Wall st. package loans issued by unregulated subprime lenders.

I was also thinking of how California was plunged into darkness -- literally -- after its power grid was deregulated and more control handed to Enron and other free market, private sector "traders." The wealthiest state left gasping from a shortage of electricy. LOL. That's astounding.

Japanese butter? Gimme a break. We've got butter in my Tokyo household.

0 ( +1 / -1 )

If the people were more confident about the future, and were working successful careers with great hope for the future, then Japan's population would not be declining by some hundreds of thousands every year.

Nonsense. Almost all developed countries have a declining birthrate.

3 ( +3 / -0 )

Japanese butter? Gimme a break. We've got butter in my Tokyo household.

Who cares about your Tokyo household but you? Google "Japan butter" and you find headlines like "Japan is facing yet another butter shortage" - it's not even the first time, indicating that the central planners have been repeating the same mistakes. Butter is but one, bleedingly obvious, example.

I don't care about what the Californians and American investors might or might not have screwed up - it's their business. But screw ups are a part of life. I don't want or need some moron telling me how I must tie my shoelaces every time they happen to come undone, especially when they are living off my money. I, at least, am an adult.

-1 ( +0 / -1 )

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