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BOJ, under pressure from Abe, eases monetary policy

By Leika Kihara

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Central banks that do not serve the interest of the people of the country are serving the interests of one financial cabal or another.

Abe is someone who has yet to demonstrate that he, too, is not more intent on serving the interests of the propertied class with respect to the "inflation target", but it remains to be seen what course he follows.

The crux of the matter is bringing down the ridiculous exchange rate, which has benefited only speculators and Korean electronics manufacturers.

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Since any cash holdings will more rapidly become devalued, and while the gold/silver prices are slightly down, it's a good time to transfer out of cash before hyperinflation sets in. The world is becoming like Zimbabwe.

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The yen is overvalued and further weakening will help exporters. The 2% target is a good idea - it shoiuld have been done long ago.

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Ah, Obamanomics has arrived in Japan. Say good bye the Yen as a "safe haven" currency from all the other governments who devalue their currencies. Now Japan is joining the stampede into "quantitative easing", i.e. hyperinflation.

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Ah_soDec. 20, 2012 - 05:20PM JST The yen is overvalued and further weakening will help exporters. The 2% target is a good idea - it shoiuld have been done long ago.

The yen is overvalued because the banks in Japan have such low interest rates that everyone wants to borrow money from Japan. That's why Japanese National Debt is so high (for those who don't understand national debt go away and study before you comment please).

This is a GOOD thing, why mess with it? Yes it hurts physical exports, but service and financial exports (a MUCH larger economic sector in Japan) are aided by it. Japan must realise that it is times have changed and Japan is no longer reliant on its manufacturing sector... of course Abe doesn't even know what decade he's in and still thinks Bush is President, so maybe this is expecting too much...

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Abe will defy all economic fundamentals. Good economy was 'Made In Japan'so is deflation, its only Japan who can solve (or never solve) this problem !

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Frungy: Japanese national debt is held predominantly by the Japanese, but for all other countries, this is not true. So there is something wrong with your thoughts. I think you should go back and study a bit before commenting.

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The yen is overvalued because…all the other currency printers are in a race to devalue faster than the others. It's a race to the bottom.

Only a lunkhead banker or statist lackey would promote it. Keynesian economics at its idiotic worst.

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It's simple that any policy creates good effect and bad one. Japen is going to print lots of cash, as what the US did 3 times so far, to stir up economic energy now. All countries will dump yen! So friends, just sell your yen ASAP!!!!

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The debt situation in the US is really not that bad and people are in a panic; the debt situation in Japan is staggering and the only way left to deal with it is to keep government borrowing costs low (low interest rate) and inflate it away. A 3% inflation rate when interest rates are 0% is a 3% tax on savings. That 10 000 yen note in your pocket will soon buy 5000 yen worth of goods; time to buy a wheelbarrow. I have thought for a long time that the only prospect the Japanese government has of ever getting out of the hole is to nationalize everyone's savings; it has begun.

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can anyone care to explain why it is a "good thing" that japanese debt is held predominantly by Japanese instiutions? Because only the Japanese will accept the paltry rates being offered for their money?

Either way, debt is debt and needs to be paid back eventually

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The Yen is strong because foreign investors flock to it due to its security and stability. The Yen is stable because the Japanese own most of their staggering debt that runs 200% Japan's GDP. There is no way Japan will be able to weaken the Yen on its own and will have to pull off massive swaps. They have tried this a few times on their own since Fukishima and while it delivered a decrease it was merely temporary. Japan has failed to get a 1% inflation rate so it is extremely unlikely that they will achieve 2% while the Japanese sit it out and hoard the cash.

If the Yen is to weaken, then Japanese companies will start profiting more and share prices will increase. Right now, Japanese companies have lost their shirts due the repatriation of the Yen based on oversea's sales. If HJapan wasn't an exporting nation, then they would not have any trouble. However, while the Yen is/was at post WW2 highs, Japanese firms had an incredible opportunity for M&A action with foreign companies and set LT deals with SE Asia on resources. SOme took advantage some did not... The Japanese gov't has been cutting deals in Myanmar and forgiving its debt to Japan since it reopened. Having a trading partner with low manufacturing and an abundance of resources will reap major rewards later and the fact that these deals were all cut with a strong Yen fuels even more positivity down the road.

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For those calling on inflation as a bad thing, think again! that mentality has caused Japan to be bone idle for the better part of 20 years! Somebody posted above that deflation is a good thing? Really, how so? When an economy is in deflation there is no end and it will spin out of control. There is no easy fix to reverse deflation, it just works itself out, normally by people buying goods. Prices in Japan are expensive but they are not going to get any lower. People need to spend their money. The tax revenue alone will assist in paying down the massive debt. It will also contribute to paying for Japan's abundant social programs. Right now, thre is an increase in aging workers set to leave the workforce and a dearth of younger workers coming in. So, how will less people be able to pay for more people without a tax increase, consumer spending, and other social reforms. In order to correct this, Japan will have to loosen immigration, allow women to actually work full time career positions because without it, the income tax revenue is just not there... Japan must rethink its old ways, people need to realize that prices are not going to get any lower, even while still expensive in comparison to other countries (case in point a small cup of Starbucks cost me less than $2 here in the States but in Japan its nearly double)... They have to go out and turn the economy around themselves because if not, Abe and the gov't will open the floodgates and if they open it too much for too lonog, Japan will enter hyperinflation, which would be detrimental.

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If the Japanese do not contribute to the turnaround, you all give Abe and the BOJ carte blanch in spending and adding to an already ridiculous amount of debt. Eventually, the credit agencies will downgrade Japan and it will cost more to borrow, which will only fuel the debt further. If Japanese go out and spend and we see some inflation, then Abe and the BOJ will back off in its infiltration of weakening the Yen and massive spending...

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Its a fine line to walk, too much inflation will crush the Japanese. Too little or none, will keep Japan on its dangerous path that it has toed for nearly two decades. There has to be a change in philosophy and thinking from the top down... Acting on the same methods that Japan has been doing is clearly not working... Its only getting worse. Japan needs leaders who will buck tradition and begin thinking outside the box... Otherwise it'll just be more of the same and the tailspin will contuinue...

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Frungy, though manufacturing is declining as a share of the economy, manufacturing is still the primary source of world trade. Trading services is much harder to do, especially for an isolated country like Japan with its own language, shared by no one else. Thinking one can replace physical good exports by service exports is foolhardy at best. For most countries, trade in goods is 3 to 5 times larger than trade in services, and most of those traded services are things like transport, which is tied intrinsically with the trade of physical goods.

Though I am wary of Abe's right-wing nationalist policies, this policy of forcing the BoJ to loosen its monetary policies is excellent.

The economic crisis is, at its core, a problem of too much debt and not enough money. During the boom, people have acquired too much debt and there is not enough money in circulation to allow debtors to repay their debts. But money is NOT a limited resource. This debt overhands is the sclerosis of the economy, and the easiest way to get rid of it is to flood the economy with new money in a controlled manner so as to make it easier for people to repay their debts.

Ignore the goldbugs. Gold is not wealth, assets aren't wealth. Wealth comes not from owning useless metals but from productive economic activities that satisfy people's needs and desires. We should not sacrifice economic activities just to protect the value of inert assets owned by a few rich people.

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@ Herve, What's you r addess? I need to send you an economic text book... You keep buying gold and silver... Smart Japanese would be swapping Yen for USD while it is strong. Later on when the Yen finally weakens (or USD strengthens), people will be able to walk into a bank and convert the USD back into more Yen they had originally.

You, will have a bunch of gold coins that you overpaid for in a inflationary panic and will have to canvas coin shops to try and have them buy it back from you. Oh and when the USD is strong and Yen weak, gold prices will have already fallen and you will be selling at a net loss...

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You, will have a bunch of gold coins that you overpaid for in a inflationary panic and will have to canvas coin shops to try and have them buy it back from you. Oh and when the USD is strong and Yen weak, gold prices will have already fallen and you will be selling at a net loss...

Yep. Still 10% of financial portfolio should be in gold for long term strategy.

Everyone else will get benefit except Japanese consumers. They will be the biggest loser- a big time.

Their savings have already lost its value in the past 60 years, and they will be losing even more. How long Japanese consumers are willing to take another big blow like this from J. Govt?

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If Abe is so keen on 2% inflation why doesn't he just raise the consumption tax by 2% immediately? He will get instant inflation and there will be no need to pressure the BOJ.

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Doublehelix, let me give you the long and short of it,

I'm long on certain commodities and real estate, fat and happy. I'm short on stocks and currencies. I buy low and sell high. Bought my first bullion bar before Tricky-Dicky closed the window.

Any textbook you might offer would most likely be filled with Keynesian malarkey, the same which has led to this fiscal cliff contrivance, so not worth the paper it's printed on, boy.

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" . Oh and when the USD is strong and Yen weak, gold prices will have already fallen and you will be selling at a net loss..."

And that'll happen right about the time pigs fly.

You might think the Oracle of Omaha rightfully hates precious metals, but he does so after having gotten burned by trying to treat them like stocks, what a dope!

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I haven't seen in money falling from the sky yet - can this be really true?

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What about the US debt? Surely that is impossible to repay? Japan is going down the same road. As long as governments can produce debt surpluses and booms by QE then commodities will always have a value. Hyperinflation is a reality-ask the Argentinians and the Germans about this as both countries felt its effects. People with just cash and little assets were made bankrupt.

There is a case for having savings in gold as thousands of years of human history will testify to.The recent Basel proposals will make gold a tier one asset,as good as cash (which it is already). In fact it will have a better convenience value as it is more fungible than any one currency. In 20 years the yen in your pocket will have been replaced by different types of paper but gold will still have value. In the meantime I suggest putting some cash into sugar which is at a current low....

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