politics

Aso says BOJ's Kuroda should be praised for quantitative easing policy

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The QE has indeed been successful, but Kuroda's current talk of "fiscal consolidation" is worrying and could lead to erasing the gains generated thus far by the stimulus.

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Remains to be seen if it has longer lasting positive (and, more likely, negative,) effects

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The stupid leading the near-sighted Mr Magoo.

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Okay Mr. Aso ... let's unload heaps of praise on Kuroda-san. Oh, by the way Kuroda-san, thanks for sending prices sky high throughout Japan. Thanks for leaving less money in my pockets at day's end. Thanks for your backing of Abenomics, which has just led to the closing of a popular local supermarket in Yotsuya (in Tokyo).

Deflation seems to be over ... now, Kuroda-san, how are you going to end this spiraling inflation, which seems to be getting out of hand ...

If you want real praise Kuroda-san, why not bring things under control to where the financial scene makes real sense for everyone concerned ...

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"how are you going to end this spiraling inflation..."

It sounds like you haven't been to Seiyu recently.

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When there are no signs as to where the 3 Arrows have landed, best not to be too congratulatory. Grave mistakes often become known right after the congratulations.

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@edojin

Sounds like you need to take econ 101.

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JeffLee, those aren't just Kuroda's current remarks, Kuroda has consistently been saying this right from the outset of his tenure.

Nor are they the views of Kuroda alone. BOJ board member Kiuchi also issued his own warnings yesterday, noting the risk of "undermining confidence in the country's finances" and causing a "sharp rise in interest rates by strengthening the view that the central bank is monetizing public debt."

He apparently advocated shifting from asset purchases to "interest rate policy". (Outrageous stuff, what is the world coming to?)

BOJ board member Sato was also reported by Reuters as calling for "fiscal reforms", and warning of "limits to the extent BOJ can keep yields low."

The government, in the meantime, must keep up efforts to rein in Japan's huge public debt and curb the cost of borrowing because once the country exits from deflation, expectations of an improving economy and future inflation will likely put upward pressure on nominal long-term interest rates, Sato said.

"The success in overcoming deflation might produce unwelcome spill-over effects" given the significant size of Japan's public debt, he said.

http://www.reuters.com/article/2014/03/19/japan-economy-boj-idUSL2N0MG0P420140319

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"BOJ board member Sato was also reported by Reuters as calling for "fiscal reforms"

At the end of the day, it's austerity, whatever you want to call it, "reform," "consolidation," etc.. And that's an approach that doesn't work in the real world, as shown by real events, such as the DPJ's "revitalization unit," and had earlier been justified on data we now know as false. The expansionary policy is giving results. Austerity ("shrinking policy") gave disappointment.

"undermining confidence in the country's finances"

They've been saying that for the past decade. In the meantime, Japan has been a favored "safe haven" among global investors even as it's debt ballooned. How's do you reconcile "undermining confidence" with being a global "safe haven" ?

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JeffLee,

Tell it all to the BoJ monetary policy committee, not me :)

I'm 5 days late, but if I throw in my worthless 2 yen, "austerity" to me means cutting back on government spending. "fiscal consolidation" means getting government's books in better shape. Not exactly the same thing, although cutting back on government spending could be a part of fiscal consolidation.

had earlier been justified on data we now know as false

I think you are talking about a Reinhart&Roghoff(?) paper that some Europeans had been using to call for austerity, I gather. I missed most of that debate until it was done and dusted, but to me a paper with wrong data does not show that the opposite conclusion ought be drawn. That doesn't make sense at all.

Indeed I can take a look at places like Venezuela and Argentina and see how a lack of fiscal discipline has worked out for them (even though they can print as much currency as they like, just as Japan can).

In the meantime, Japan has been a favored "safe haven" among global investors even as it's debt ballooned. How's do you reconcile "undermining confidence" with being a global "safe haven" ?

With respect to this point, just pull up a 10 year chart of the Swiss Franc versus the Yen. In the here and now, facing current not past realities (e.g. fresh trade and current account balance deficits), the yen's roll as a global "safe haven" today should be questionable, at the very least. The main saving grace for the yen I suspect has been that the US and Eurozone have also been a mess.

And JGBs are owned overwhelmingly by Japanese. So it doesn't look like a "global" safe haven, but a Japanese "safe haven".

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