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Japan's inflation rate up 2.2% in March as BOJ keeps policy unchanged

21 Comments
By ELAINE KURTENBACH

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The central bank governor, Haruhiko Kuroda, acknowledged that his target of 2% inflation, excluding for the impact from an April 2014 increase in the sales tax to 8% from 5%, remains elusive. He said it might take three years, instead of the two years he originally aimed for, to reach that goal.

Bingo. Let's see what happens after the impact of the sales tax increase washes out of the numbers.

Though a decline in factory output and other key measures were less encouraging,

Now there's an understatement. LOL.

0 ( +3 / -3 )

Japan's inflation rate up 2.2% in March as BOJ keeps policy unchanged

great, all worries gone (for the time-being)...Happy Golden Week !

-3 ( +0 / -3 )

Economics sure confuses me and obviously is for a far better person than me to understand because

an actual core inflation rate of 0.2% after

2 years of the BOJ now owning 30% of all government debt.

the national debt now standing at near 260% of GDP, instead of 230% of GDP 2 years ago, thanks to more LDP pork spending.

Japan about to set off an Asian currency war with Korea, China, Singapore and Taiwan to name a few.

Industrial production and real wages still falling, even when deflation is a meager 0.2%.

Sounds like total failure to me.

Oh well..... thank god we've got some real economists on here to resolve my confusion and cheer me up by telling debt doesn't matter and Abenomics is working.

4 ( +8 / -4 )

" Wages have failed to significantly pick up for most workers" Here is your pickle, despite the cheerleading from the media when the big name Keidanren boys increase wages in the top tier companies where employees are already relatively well off, the majority of workers are not being compensated for the price increases. Then they are scratching their heads when spending doesn't pick up. Wanna see increased spending, legislate increase in tax free income threshold.

3 ( +3 / -0 )

thank god we've got some real economists on here to resolve my confusion and cheer me up by telling debt doesn't matter and Abenomics is working.

The debt doesn't matter and Abenomics is not working. Confusion resolved for you.

-4 ( +2 / -6 )

The debt doesn't matter

As usual, pure nonsense. Because if it didn't matter, Abe would not have been forced to raise the sales tax a year ago, which sent the economy into recession. But I guess it is just easier to ignore that.

1 ( +5 / -4 )

Abe would not have been forced to raise the sales tax

Abe was not forced to do anything. He chose to raise the sales tax and got the inevitable recession that such an act of stupidity deserved. The government of Japan is the issuer of the Japanese yen, and it chooses (for reasons that have nothing to do with "funding" the government) to issue debt instruments in matching quantity. It can chose at any time to either stop issuing bonds or to refund and cancel existing bonds. The sales tax was raised because Abe and his advisers don't understand such basic monetary economics, just like Kuroda doesn't understand what inflation is and how it affects an economy. They all make quite a team.

-3 ( +3 / -6 )

The debt doesn't matter

does size (of debt) matter? "Debts & Lies are generally mixed together" - Francois Rabelais.

5 ( +5 / -0 )

The government of Japan is the issuer of the Japanese yen,

Completely wrong. The government is the issuer of the Japanese yen as much as the city of Yubari-shi in Hokkaido is (and Yubari-shi went bankrupt).

The BOJ issues Japanese yen. If the government wanted to steal that function, it'd have to change the Bank of Japan Act. Changing the Bank of Japan Act in such as a way as to allow the government to overtly "fund" itself would not result in a fairy tale outcome.

6 ( +6 / -0 )

@Guy: You are right on. I try to explain this to people and they tell me I am wrong.

-4 ( +2 / -6 )

Well JapanGal, countries that issue debt in their local currency have been known to default. And printing off more of your own currency to pay your debts is hardly "not defaulting" anyway - it's just opting to drink a different poison.

3 ( +5 / -2 )

Bank of Japan, listed Jasdaq stock, code 8301; 55% owned by the Ministry of Finance. Don't like it put up a take over bid..

0 ( +0 / -0 )

The sales tax was raised because Abe and his advisers don't understand such basic monetary economics, just like Kuroda doesn't understand what inflation is and how it affects an economy.

But you do?! LOL. Keep on fooling yourself if you want, but please stop trying to fool us.

-2 ( +1 / -3 )

Well JapanGal, countries that issue debt in their local currency have been known to default.

Indeed they have. Because a) like Argentina, they pegged their currency to the US dollar at an unsustainable level, a situation not applicable to Japan or b) like Russia, they made a political decision to default, likely due to financial illiteracy, even though there was no economic or financial reason to do so. If you think situation B is a risk for Japan, then you are proving my point about the incompetence of those in charge.

The government is the issuer of the Japanese yen as much as the city of Yubari-shi in Hokkaido is (and Yubari-shi went bankrupt). The BOJ issues Japanese yen.

Anybody who thinks the BOJ issues the Japanese yen clearly needs to brush up on their knowledge of what a central bank is and what its functions are. The BOJ manages interest rates (aka "monetary policy"), prints out physical yen notes which are distributed in exchange for existing bank reserves (aka "money"), and purchases existing assets (which represent already existing money) to provide liquidity and in many cases solvency to the banking and financial system. It is forbidden by law from issuing Japanese yen directly into the real economy. Yen is issued through the fiscal operations of the Japanese government and loans made by commercial banks (which have a matching liability). Yen is not issued by the Bank of Japan.

Keep on fooling yourself if you want, but please stop trying to fool us.

Um, I'm not one of the people who spends years making predictions that never come true, then says "Yeah well maybe not yet but SOOOON!!! It's INEVITABLE!!!!!" But we have lots of time, and it will be clear in the end who was fooling themselves.

-1 ( +3 / -4 )

Um, I'm not one of the people who spends years making predictions that never come true, then says "Yeah well maybe not yet but SOOOON!!! It's INEVITABLE!!!!!" But we have lots of time, and it will be clear in the end who was fooling themselves

No, you are one of the folks who fools themselves into thinking they understand what is going on in Japan, and, most dangerously, actually believes his nonsense. But, even if you are right about the Japanese debt situation, you willingly ignore the obvious question -- so what? All this hocus-pocus that you seem to believe they are so brilliantly playing with their debt, has not bought them a thing. The economy is still stuck in a decades-long funk, and the population keeps shrinking and aging. So, please, enlighten us with your prediction on how any of this gets Japan even one tiny fraction closer to prosperity? Surely not even you believe a rising debt with a shrinking or even flat economy, and therefore tax base, can be a good thing?

-1 ( +2 / -3 )

@jerseyboy - In case you've not being paying attention, Japan's "funk" is now being duplicated in every industrialized country around the world. The only Japan, country-specific, issue that matters is the question of why the system started to break down in Japan first, and who was responsible for that happening so much earlier in Japan than everywhere else. But the issue of private debt saturation and the end of debt based growth is now the rule everywhere, despite the popularity of the tired "Japan is a basket-case" narrative. Nope, the entire world is a basket-case now, and will continue to be as long as people obsess about things that didn't create any of the problems like government debt while they ignore the real causes.

-1 ( +3 / -4 )

The central bank governor, Haruhiko Kuroda, acknowledged that his target of 2% inflation, excluding the impact of an April 2014 increase in the sales tax to 8% from 5%, remains elusive. He said actual inflation is flat at 0% and it might take three years, instead of the two years he originally aimed for, to reach that goal.

Then in 2018, Kuroda will say he needs two more years....

It's appalling how people like Kuroda, and Abe can have such a poor understanding (or perhaps it's disregard) for how inflation actually works.

DEMAND has to go up: pure and simple. People need more disposable income with which to buy discretionary goods and services (or invest). Tax increases won't bring this about.

0 ( +0 / -0 )

they made a political decision to default, likely due to financial illiteracy

Ah yes. They must have been illiterate. But of course.

If you think situation B is a risk for Japan, then you are proving my point about the incompetence of those in charge.

Or that it is you that is financially illiterate.

History stands as it stands, nations printing their own currencies have defaulted. There is nothing to guarantee that Japan will not (or alternatively have no option other than to choose an equivalent poison). It is folly to pretend that the large debt ever according to some measures has no potential risks associated with it whatsoever. That you concede politicians may opt to default (rather than bringing down hyperinflation upon their peoples) proves my point. They must act in the real world, not in some imaginary fairy tale world.

The BOJ manages interest rates (aka "monetary policy"),

These days they aren't targeting the interest rate any more, but the BOJ would do that by conducting open market operations - the buying e.g. buying assets like JGBs from the secondary market. And what did they buy these JGBs with? With new Japanese yen that they create out of thin air. Those yen do not come from the government, it is the BOJ that does this. Wherever you picked up your wacky theory from, I assure you that it is quite wrong, and as a result so are you.

Yen is issued through the fiscal operations of the Japanese government

Completely wrong and backwards.

Yen is not issued by the Bank of Japan.

So those yen notes in your wallet with "BOJ note" written on them must be forgeries.

...too easy

Um, I'm not one of the people who spends years making predictions that never come true

You do appear to be one of the few comprehensionally challenged who fail to distinguish the existence of risk with the concept of theory and prediction.

1 ( +1 / -0 )

If only the company I work for would raise my salary 2.2%...

0 ( +0 / -0 )

Um, I'm not one of the people who spends years making predictions that never come true, then says "Yeah well maybe not yet but SOOOON!!! It's INEVITABLE!!!!!" But we have lots of time, and it will be clear in the end who was fooling themselves.

The collapse has already occurred. No need in making predictions for an event which has already taken place. We are seeing the effects of the collapse right now. When Japan's population started declining, and the economy became deflationary, the collapse began.

Since the bubble economy burst, the government and business began funding the economy and themselves by borrowing. The Japanese government, Japanese companies, and Japanese banks are all intertwined. Amakudari practices give high paying corporate jobs to former bureaucrats, former business executives get jobs in the bureaucracy. To keep the banks, companies, and government running, all involved have borrowed money to keep things going. The result of all of this is a national debt which is now more than 250% of GDP.

Japan has been able to keep a sharper collapse from happening by borrowing and spending, much like a recently unemployed person paying his bills with a credit card. Japan has been able to keep bond rates low by selling bonds to a captive market where regulators and the regulated can collude together, but when we eventually reach the point where the only large scale purchaser of bonds is the Bank of Japan itself, then things are indeed bad. This is not much different than a regular business person buying goods from himself because there are no other customers to buy them.

Japan's collapse has been a gradual decline, but the decline is becoming steeper, as the hold dug by borrowing becomes ever deeper.

1 ( +2 / -1 )

Sangetsu03 has explained well. The collapse has silently spread but temporarily supported by more debts from government, more buying by BOJ and steady draining of household savings in past 20 years. When it hits a trigger point of lost of confidence, JGB bond yields will escalate and its game over for Japan as a "rich" nation. There is wisdom in this from Sangetsu03 "This is not much different than a regular business person buying goods from himself because there are no other customers to buy them"......then the creditors, suppliers and bankers will have to call back the loans.

-1 ( +0 / -1 )

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