business

BOJ's Sato warns of diminishing returns of monetary easing program

7 Comments
By Leika Kihara

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But Kuroda and Abe just jawboned the currency up 3 yen, amazing! How did they do it? Change any policy , or fantastic numbers from the GDP? Nope, nope and nope. Sato is correct, you can only buy all the bonds for so long without a problem, and you can only jawbone the currency so many times as well, good luck finance ministers.

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Never liked Sato, or trusted him.

When Shirakawa was BOJ governor, Sato was all for monetary stimulus and undermined Shirakawa's position, when Abe became PM.

Now he's changed sides, since Shirakawa has been proven right about the inflation target.

I expect people on the BOJ board to be more sage than this.

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Another good article from Thomson Reuters.

Steady progress in restoring Japan’s fiscal health is crucial for the success of the BOJ’s quantitative and qualitative easing (QQE) campaign including a smooth exit from the huge asset-buying program

This is a very important point, always overlooked by those afflicted with short-term thinking. The stock market is up under Abenomics / Kurodanomics, but how will people's lives have been effected after the attempted QQE exit? Will the BOJ be able to actually attempt an exit, in the face of political pressure to keep doing more?

the government will craft a fiscal plan this month

A "fiscal delusion" more like.

Abe has worried fiscal hawks by stressing that he will prioritize boosting economic growth and tax revenues, rather than spending cuts. Critics say the BOJ is keeping lawmakers complacent about fiscal reform by pushing borrowing costs artificially low with its huge bond purchases.

I guess I am a "fiscal hawk" / "critic", but my worry is not that Abe wants to prioritize boosting growth and tax revenues, but that his "plans" to do so seem to be unrealistic / lacking.

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Critics say the BOJ is keeping lawmakers complacent about fiscal reform by pushing borrowing costs artificially low with its huge bond purchases.

Of course they are.

“It appears to me that the degree of difficulty in implementing QQE is rising,” as its effect in pushing down nominal interest rates has been diminishing, he said.

Of course it is. But don't expect any change, since Abe and Kuroda are both "one-trick ponies".

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By definition, for there to be "diminishing returns" there have to have been "returns" in the first place. There weren't any.

And this article contains the following scary words and phrases: massive, fiscal health, fiscal discipline, industrialized world’s heaviest public debt, drying up bond market liquidity, pushing borrowing costs artificially low with its huge bond purchases. And of course "Critics say the BOJ is keeping lawmakers complacent about fiscal reform by pushing borrowing costs artificially low with its huge bond purchases." Comedy gold!!!

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"Premier Shinzo Abe has worried fiscal hawks by stressing that he will prioritize boosting economic growth and tax revenues, rather than spending cuts."

So let the "fiscal hawks" worry away. Their influence and the pursuit of "tax revenues" gave us the last recession. Let's not repeat the idiocy of removing consumers' purchasing power amid weak private demand.

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Sato was among those who voted against the BOJ's decision last October to expand QQE to prevent slumping oil prices, and a subsequent slowdown in inflation, from delaying an end to deflation.

While warning of the diminishing returns of QQE, Sato brushed aside the possibility of reverting to a policy targetting interest rates and cutting the 0.1 percent in interest the BOJ pays to excess reserves parked with it.

"Tweaking the interest won't mesh with our balance sheet target. At present, that's not in our plan," he said.

Some market players speculate the BOJ may cut or abandon the 0.1 percent interest in the future to push down yields and weaken the yen. [size=1][url=https://sites.google.com/site/tinytanksunblocked/]tiny tanks unblocked[/url][/size]

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