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BOJ's delay in inflation target throws Kuroda reappointment in doubt

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Like Abe,the old man has achieved nothing of note beyond setting unachievable targets.No doubt he'll be in line for a job from heaven,when he goes.

7 ( +8 / -1 )

Abenomics, with its reliance on monetary policy, has reached its limit," he said, referring to Prime Minister Shinzo Abe's economic policies.

It never got off the ground. It was a failure from the start. Anyone who knew anything was saying that from the start.

The BOJ has struggled at every turn to reach the target as tepid wage growth dampens consumers' willingness to spend, making it hard for businesses to raise prices

So raise the minimum wage. Done.

Kuroda's current term ends next April, and many analysts have floated the idea of the 72-year-old former Finance Ministry official serving a new five-year term to see the central bank through to the inflation target and subsequent exit from easing.

Typical Japanese response to a problem. Don't change course. Just Gambarre. Doesn't work. Kuroda doesn't know what he's doing either.

If the BOJ is forced to raise its guidance for interest rates, it could become another hurdle to reaching its inflation target.

More useless jargon...put money in people's pockets and you will get inflation. simple.

9 ( +10 / -1 )

"Abenomics, with its reliance on monetary policy, has reached its limit," he said, referring to Prime Minister Shinzo Abe's economic policies.

And achieved absolutely nothing.

5 ( +5 / -0 )

I was watching the news last night, and Kuroda is angry that companies have not passed on price hikes to consumers so that he can get his 2% inflation. But this man doesn't seem to have a clue, that if people don't have money, and they are stressed about the future, and their pensions are constantly being cut, while their taxes are being raised to pay for all of your economic stimulus, of course they will not go out and spend more. Why is that so hard for these people to understand?

13 ( +13 / -0 )

if people can't afford a price rise, how do you expect businesses to be even able to do so in the first place? If people do not shop and consume, it means the end for many businesses and their employees. The notion that Kuroda thought he could do this defies all rational logic; and even worse is that this kind of sham idea is touted as "skilled fiscal planning"....what a sick joke.

6 ( +7 / -1 )

But this man doesn't seem to have a clue, that if people don't have money, and they are stressed about the future, and their pensions are constantly being cut, while their taxes are being raised to pay for all of your economic stimulus, of course they will not go out and spend more. Why is that so hard for these people to understand?

Uhm, because "these people " aka Kuroda are living in a theory cloud far removed from everyday Taro,s life challenges and he only wants to hit his 2% so he can be "the guy" who did it , regardless of what it would do to Taro,s quality of life. Pretty much like Abe.

Your comment is spot on btw, it is clear as crystal to everyone apart from the blue blood politicians and their bureaucrat servants.

8 ( +8 / -0 )

That's the sixth time he's delayed it -- the self-proclaimed "genius" who blames everything but himself for being anything but. He and his ilk don't seem to care what the costs of reaching that or any similar target would ultimately be -- he just wants to say "I did it", same as Abe wants to be able to say he changed the Constitution, etc.

6 ( +7 / -1 )

It never got off the ground. It was a failure from the start. Anyone who knew anything was saying that from the start.

This is because Abenomics was never about restoring economic growth. If that were the case, it should have begun with deregulation and fiscal reform. Abenomics was merely an excuse to loot the economy further trillions of yen. Abe pulled the typical political bait-and-switch, get a mandate from the voters to fix the economy, and then misuse this mandate to try to change the constitution. Had he told the voters that he intended to implement Zimbabwenomics and spend most of his time trying to change the constitution, he would be working in his garden instead of being prime minister.

So raise the minimum wage. Done.

It's not that easy, more than 70% of Japanese companies don't earn a taxable profit, and cannot afford to raise wages. Most are swimming in red ink. The lack of inflation is caused by lack of demand, and lack of demand also causes stagnant wages. It is not wages which drive inflation, but demand, and so long as demand continues to decline, so will inflation and wages. In a country with positive economic and population growth, minimum wage increases can be absorbed, but Japan isn't one of these countries.

Typical Japanese response to a problem. Don't change course. Just Gambarre. Doesn't work. Kuroda doesn't know what he's doing either.

Agreed.

I was watching the news last night, and Kuroda is angry that companies have not passed on price hikes to consumers so that he can get his 2% inflation.

Companies know that their consumer pool is shrinking, and quickly. Raising prices would only cause people to buy less, which would drive down demand, and push down prices even lower than they are now.

Economic growth, inflation, and wages depend on ever-increasing consumption. How much an economy can consume is limited by it's resources. Japan could easily maintain a larger population and more economic growth, but it's resources are allocated on a limited basis via Japan Inc, which have long manipulated prices and the value of the yen to keep prices high. Money is also a resource, and when items are priced above their natural value in order to pad profits and limit competition, consumption must naturally decline until this natural value is achieved. By limiting competition and fixing prices, Japan Inc has made Japan's economic bed, and now everyone must sleep in it, if they can.

7 ( +9 / -2 )

The short and simple version is:

Inflation benefits mostly companies, who will not increase wages even if they raise prices.

Debtors (like the BOJ and government) benefit from paying back debts with money worth less.

Eveyone else gets screwed.

4 ( +4 / -0 )

72 years old?!!! Time to retire no?

6 ( +6 / -0 )

I think these foolish chaps confused arrows with boomerangs.

6 ( +6 / -0 )

In this pic, it looks as if Kuroda has just had a shocking revelation after being handed a note saying that a bow is also needed when using arrows.

4 ( +4 / -0 )

It’s the new black in advanced economies: Low inflation. It’s a good thing, sustainability not growth is a must for survival of the systems both natural and abstract.

2 ( +2 / -0 )

Inflation benefits mostly companies, 

It depends on the kind of inflation. There are two kinds of inflation, "demand-pull" and "cost-push."

Demand-pull inflation is caused by demand exceeding supply. This causes prices for the product in demand to increase. But it also causes an increase in the supply to meet the demand, which means more materials and labor must be obtained. This causes competition for materials and labor, which drive the the value of both. This kind of inflation benefits everybody.

Cost-push inflation is "Zimbabwenomics", where the state creates currency as an excuse to increase inflation, but in reality does so to pay or devalue it's own debts. Cost-push inflation results in higher prices, but it does not result in higher profits or wages, because there is no change in demand. Cost-push inflation is really a stealth tax, by which the state can pay for it's spending by taking the value of your wages and savings without bothering to take the actual cash.

The BOJ is running on a rebooted form of Keynesian economics. In Keyne's day, economics were in flux, due to the rapid increase in industrialization, wealth, and the advent of state pensions and increased state spending. In order to get through the downturns in their economies, it was seen as necessary for the state to deficit-spend for short periods in order to keep economies running evenly, and then recouping what they had borrowed and spent as the economy grew.

But this is not the 1930's, industrialization and population are no longer growing at strong rates. In Japan they are not growing at all, so Keynesian economic policies simply cannot work. The government has borrowed, printed, and deficit-spent trillions of yen in order to cause growth, but Japan's economic environment makes growth impossible, it's like planting crops on a concrete parking lot. When the crops fail to grow, the government's response is just throw on some more seeds.

Everything which Abe and Kuroda have done is utterly futile, in fact, in the long term, their policies will make things worse than if they had done nothing at all. You cannot grow crops on concrete, you cannot create higher wages and economic demand by robbing the people of the value of their wages and savings.

It’s the new black in advanced economies: Low inflation. It’s a good thing, sustainability not growth is a must for survival of the systems both natural and abstract.

Not quite. Because state spending at the current rates is unsustainable. Economics is about value, and the value of things. Everything has a value, and that value is what people are willing to pay for a particular product or type of labor. The world's economies are based upon creating wealth by earning a positive return on their economic activity. 10 cents of lemons, water, and sugar can create a glass of lemonade which can be sold for more than a a dollar. All businesses try to run this way. But to make that dollar, you need that 10 cents. And once you earn that dollar, you have to pay for the materials for the lemonade stand, the people who helped you make the lemonade, and lastly, your taxes. When all is said and done, what ends up going into your pocket out of that dollar may be only 15 cents.

But public-sector spending is taking up ever larger amount of the wealth that the private sector creates. In Keyne's day, public spending was a scant fraction of what it is today. The problem with public-sector spending is that it is at best, value-neutral, and in most cases, absorbs more wealth than it creates. For every dollar you pay into Social Security, or every yen you pay into Japan's pension fund, you will get less than a dollar or yen when you retire. The government will spend one dollar on a glass of lemonade and sell it to the taxpayers for 10 cents to buy their votes. The problem is that of that one dollar the state spent to make the lemonade, it had to borrow 80 cents to do so. You get your glass of lemonade for 10 cents, but the 90 cent difference, plus interest, is taken out of your taxes. In the long run, your ten cent glass of lemonade costs more, much more, than what a kid in a lemonade stand would have charged.

Resources are limited, but in order for an economy to grow and prosper, these resources must be used wisely. Businesses and people tend to do a good job at using their resources wisely, because there are harsh consequences for not doing so. The same consequences do not apply to the state, at least in the short term. In the long term even the state must pay for it's foolishness. But the heads of state won't pay, it will be the people.

You cannot get something for nothing, everything has a price, and everyone pays. There are no exceptions to this rule.

1 ( +4 / -3 )

Sangetsu

You nailed it and make it so easy for even for us who know nada about economic

More grease to your elbow,

-2 ( +0 / -2 )

so sangetsu, what can we expect? I see deflation as a natural consequence of shrinking population. I know the old folks will use their overweight voting power (My family of 5 person has 2 votes with 2 kids who can't vote and 1 disenfranchised gaijin who can't vote; my mother in law's household of 2 has 2 votes) to get resources. My only hope is that as the population shrinks and the labor pool shrinks I will be able to get higher wages.

1 ( +1 / -0 )

So, in the six years since Abe took office he has increased sales taxes, reduced corporate taxes, failed to secure salary increases, has done nothing about the child or aged care crisis, has done nothing about equality in the workplace, failed to give the promised incentives to families, has twice borrowed more money from the BOJ, has done nothing about increasing exports or opening up new foreign markets and, as a result, has created a drop of up to 30% in consumer spending in some sectors. Yet, after all this 'nothing' he and his cronies are still dreaming of a 2% increase in inflation? Just how do they expect to perform this miracle? I think Abe and his crony mates need to grab a pair of ruby slippers each, all join hands and start singing, "Somewhere over the rainbow...."

1 ( +1 / -0 )

this man doesn't seem to have a clue, that if people don't have money, and they are stressed about the future, and their pensions are constantly being cut, while their taxes are being raised to pay for all of your economic stimulus, of course they will not go out and spend more. Why is that so hard for these people to understand?

Yes, but in his defense, none of those problems you outlined can be solved by the central bank printing money, which is the only thing he has the power to do. 

The problems you rightly outlined as clamping down on personal sentiment can only be solved by the government overhauling the pension system and making for a sustainable and secure alternative, and government cutting taxes as part of an overall spending reform package to make government spending sustainable.

The person with the power to reform the pension system and reform government spending is the Prime Minister.

Kuroda said repeatedly early in his term that he expected that the government would stick to its part of the agreement between the central bank and the government - but while Kuroda has printed money galore, the government has failed to deliver on the "third arrow" structural reforms.

Japan can be fixed, if only a Prime Minister with serious guts comes to power and kicks butt.

0 ( +1 / -1 )

So raise the minimum wage. Done.

It's not that easy, more than 70% of Japanese companies don't earn a taxable profit, and cannot afford to raise wages. Most are swimming in red ink.

I don't see that changing the minimum wage is anything more than just fiddling around the edges anyway. 

The vast majority of people who work in Japan are already earning above the minimum wage, and of those that are working for the minimum wage, a good number are spouses just looking to make some small extra income beneath with spouse tax deduction threshold. Not people who are trying to support a household on that income.

So I can't see that Japan's issues could be solved by just by tinkering with the minimum wage. I do wish it would be hiked, if only so that everyone could see that it had been tried (and, I suspect, failed), so we can get on with much broader and tougher structural reforms. There is far more to be fixed in Japan than just a single arbitrary wage level!

(This is not to say "screw you" to minimum wage earners - as part of government spending reform, I believe government spending should primarily be focused on assisting the needy. Part of the problem we have today with government spending is that huge amounts of money go to people who are more than capable of taking care of themselves, which also involves much waste in processing that money through the bereaucratic system)

-1 ( +0 / -1 )

@Sang, you've misunderstood, profit will still be made, just sustainably and the statement supports the state to stop spending, because low inflation is the new black. QED. It’s urinating in the wind.

5 ( +5 / -0 )

@Advice is free. So is thought. There are plenty of things that are exceptions to your ‘rule’. Plus, well, your thinking is somewhat timed out and anchored in the C-20th.

The global economic situation until recently has been one where -- regardless of political edifice or ideology -- rapid expansion of production has been rewarded. Now, we've reached the moment where expansion is no longer necessary, but radical redistribution and rebalancing of the production of goods and services is critical to any continuing stability, worldwide. (Dust off Das Kapital)

We continue to exist, therefore, in an environment where the incentives taken for granted as natural -- the need for there to be businesses, that expand, and profit -- have become seriously dysfunctional. They operate against the grain of the future AS IS. Until this changes, we will continue to be subject to political and economic chaos, disruption and breakdown. What has heretofore seemed "peripheral" phenomena -- war, crisis, the mass flow of refugees from destroyed parts of the planet -- are increasingly showing up at the core of the regions who've benefited from expansionism for the past 100 years.

This invasion of the core by chaos will continue as long as the imbalances introduced by ceaseless expansion and the demand for profit fail to be replaced by the goals of equitable, rational distribution and maintenance, of all resources for all sustainably.

1 ( +1 / -0 )

@Sangetsu03

"...more than 70% of Japanese companies don't earn a taxable profit, and cannot afford to raise wages."

 

Gimme a break. Many rich and successful corporations don’t have “taxable profits.” Starbucks in the UK hasn’t reported any such profits for over a decade. This is usually a measure of tax avoidance more than anything.  

 

Profits in Corporate Japan are again at a record high, and so are their enormous cash savings. They can easily "afford" to pay wage hikes.

 

https://www.bloomberg.com/news/articles/2017-04-02/japan-s-corporate-sentiment-improves-as-profits-rise-on-weak-yen

 

The inflation target isn’t being hit because corporations are choosing to hoard their profits rather return some of them to the people who created them in the first place. AKA, “a race to the bottom.” The BoJ and government can do little about this about from hitting the greedy so and so's with higher taxes.

-1 ( +1 / -2 )

so sangetsu, what can we expect? I see deflation as a natural consequence of shrinking population. 

You are correct, what must be addressed is the cause of population decline. Populations are limited by resources, the main resource lacking in Japan is money, and your younger Japanese lacks money because prices are too high. How much does it cost to clothe, feed, and educate a child in Japan? When you are paying more than double what Europeans pay for staple products, and three times what Americans pay, then add the long work hours, long commutes, short holidays, and small housing, young people are not very encouraged to have children.

Fewer children equals fewer consumers, which equals lower sales, which equals lower profits, wages, and tax revenue. Until this problem is resolved, there can be no economic growth in Japan, period. There are two ways to do this, either to drastically deregulate the economy and enact sweeping fiscal reforms, or do nothing at all. Doing nothing at all will cause the economy to collapse, along with the value of goods and labor. Deregulation and fiscal reform will become irrelevant because there will be little left to regulate, and no way to borrow or spend worthless currency. The economy will have to start over from scratch. This would likely be called a "collapse of capitalism" when in fact, it was actually a failure caused by the gross abuse of capitalism.

you've misunderstood, profit will still be made, just sustainably 

You have to understand that the state cannot sustain it's current, debt-fueled spending in a low-interest economic environment, it's not possible. All government budgets assume a minimum of 2% inflation, which, compounded over time, relieves a great deal of the burden of their debts. Without at least 2% inflation, their ability to manage their debts is greatly reduced. With Japan passing record budget after record budget under Abe, with these budgets all assuming that Kuroda will meet his inflation goal, spending and debts are becoming unsustainable (assuming that they have ever been sustainable).

Gimme a break. Many rich and successful corporations don’t have “taxable profits.” Starbucks in the UK hasn’t reported any such profits for over a decade. 

To be a "rich and successful" corporation nowadays requires state intervention. You are always advocating that the state how more power to tax and regulate, not understanding that this weeds out small and midsize companies, and leaves only the giants, the ones with the money to buy favors, in business. Half of Elon Musk's fortune has come via government subsidies. Jeff Bezos is now the second-richest man in the world, mainly because every package sold by Amazon is government subsidized to the tune of $1.30 or so. Bigger government and more regulations leads to ever larger and more powerful corporations.

In past days, when companies had to sink or swim on their own merits, there were many millionaires, but few billionaires. As we have increased the size of the state to regulate business and safety, what was a great many companies small and medium companies has been weeded down to a handful of giants.

Japanese companies are almost 60% dependent on domestic sales for their profits. The domestic economy has been shrinking for more than 30 years, and will shrink far more. Due to increasing competition from China and elsewhere, Japan's share of the export market will continue to shrink. These companies in Japan which are suffering are not rich and successful, most of them are small and medium size businesses.

2 ( +4 / -2 )

Anyone believes that Japan govt is doing a good job economically should have their heads checked immediately.

0 ( +0 / -0 )

Japan Inc & the State is one giant octopus entrenched Enterprise; it was, is and will remain big, fat, unproductive sucking up and dampening much of Japanese creativity,  small & medium size enterprises growth & profitability, etc with it business as usual attitude & power structure. Without the recent Asian-fueled tourism boom the demise of small & medium enterprises would have been much faster. BOJ is part of this Enterprise.

0 ( +0 / -0 )

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