politics

Cabinet approves Y13.5 tril economic stimulus package

20 Comments
By Tetsushi Kajimoto

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Nikkei down 1.5% may be investors are demanding more...!

2 ( +2 / -0 )

They should just send every taxpayer Y100,000. In shopping vouchers that expire by end 2016.

1 ( +4 / -3 )

Now, more than ever is the time to buy gold. The yen is going to be worthless in a couple of years time thanks to Abe.

0 ( +4 / -4 )

cash payouts to low-income earners

Redistribution, rather than doing what is necessary to grow a bigger pie.

The sell-off of government bonds looks nasty. One wonders where the move is going to stop. If the BOJ stops buying JGBs then who wants to buy them instead? Who trusts a government that can't raise consumption tax nor control spending to ever pay them back?

Where is @mr_jgb?

“With this package, we’ll proceed to not just stimulate demand but also achieve sustainable economic growth led by private demand.”

Government spending money is not a way in which sustainable economic growth led by private demand can be achieved. Who is coming up with this nonsense?

Rather than promises of structural reforms, we need structural reforms now. They will take time to have effect in the best case scenario, so it's better to get cracking as soon as possible. Once people make the adjustments to the cold hard realities, they will regain confidence and then, only then, will they start to feel OK about spending again.

1 ( +1 / -0 )

achieve sustainable economic growth

No such thing. Pie in the sky, right next to the pigs...

3 ( +3 / -0 )

Hi fxgai, good evening. BOJ is still buying 2 times of new JGB issuances. So the sell-off is only temporary, especially with the Yen appreciating. The big sell-off in JGB will come but the following factors need to be in placed:

BOJ truly adopts outright helicopter money & market players realized it. Japanese overall accumulated savings are less than net outstanding Government debts. (coming probably somewhere in 2017/8/9/0). Japanese savers & institutional investors lose faith and capital outflows pick up with a sharply weaker Yen trend in place. With the policies adopted and demographics, the JGB crash will come, only question is when? Still watching. It will be a sad day for Japan. For Japan will become a poor country pretty fast, when that happen.
4 ( +4 / -0 )

Thank you mr_jgb.

I suppose there is little probability that the BOJ will suddenly stop buying so many JGBs given the impact it would have on the economy, but at the same time I think their purchases have done little to boost the real economy. Probably they won't reach this conclusion themselves though in their upcoming "comprehensive assessment".

As for helicopter money, I personally think the key is the second part you mentioned - that "market players realized it". The BOJ is monetizing government debt now as it stands in my view, and even though players may realize this they are currently playing along anyway, like a game of musical chairs. Except when the music stops, I don't think there are going to be many chairs!

3 ( +3 / -0 )

the Bank of Japan eased policy again and announced a plan to review its monetary stimulus programme in September, which has kept alive expectations for “helicopter money”, printing money for government debt.

This was the policy followed by Mugabe in Zimbabwe. Take a look at the Zimbabwean economy to see how well that went.

3 ( +3 / -0 )

Like to splash the money around in Japan. Surely any money handed out will be a temporary boost at best. Like a single quarter of activity. Just seems like more and more bandaid solutions. Either need to more people, higher wages or decreases in taxation to spur sustained activity. And every one of those options has a severe cost. Its not easy.

1 ( +1 / -0 )

Revival of Pork-Barrel politics...

1 ( +1 / -0 )

For change, this is on American news enviously.

-1 ( +1 / -2 )

syarpAug. 02, 2016 - 11:13PM JST

Revival of Pork-Barrel politics...

It never left Japanese politics

This actually is one of the least pork barreling supplementary budgets ever produced by the LDP since 1991.

I'm a rapid critic of Abe.

However this type of supplementary budget is 25 years too late and resolves nothing but kicks the can down the road

-1 ( +2 / -3 )

@ BertieW At the start of 2004 when the Rothschilds left the gold market was the time to buy gold, i was slow but got in in 2007.

1 ( +1 / -0 )

Rather than promises of structural reforms, we need structural reforms now.

It appears that the structure will have to be rebuilt rather than reformed. It seems that no action will be taken until a general collapse occurs, and it is easier to rebuild after a collapse than to reform.

However this type of supplementary budget is 25 years too late and resolves nothing but kicks the can down the road.

This action will not "kick the can down the road", it will actually shorten the road a little more. Abe and company appear to think that one can put out fires by pouring gasoline on them, and so far every action seems to have created a result opposite to that which was intended. At least there are some of us here who can leave, but with other countries following in Japan's economic footsteps, and likely to catch fire when Japan implodes, it might not do us much good.

3 ( +4 / -1 )

sangetsu03Aug. 02, 2016 - 11:56PM JST

This action will not "kick the can down the road", it will actually shorten the road a little more. Abe and company appear to think that one can put out fires by pouring gasoline on them, and so far every action seems to have created a result opposite to that which was intended. At least there are some of us here who can leave, but with other countries following in Japan's economic footsteps, and likely to catch fire when Japan implodes, it might not do us much good

Good point and true

0 ( +3 / -3 )

Firstly really enjoy reading commenter's posts on this informative thread.

Let's not get side tracked, BOJ financials, both monetary and fiscal approach is reliant on various BOJ lag models of past rates to estimate inflation expectations, Abe san second arrow. Look closely at the comprehensive options that BOJ momentary policy currently adopts. The spread is diverse, vast and wide as one would expect.

Purchases of ETFs and J-REITs... and humbly can I draw your attention to......Establishment of Special Rules for Purchases of ETFs to Support Firms Proactively Investing in Physical and Human Capital

http://www.boj.or.jp/en/mopo/measures/mkt_ope/ope_t/index.htm/

The BOJ is not about to man the choppers even in the median term. TR seems to be obsessed with the inference of “helicopter money”

Look if one wants to delve into the deep and smelly to the principles behind so called Peoples QE, Chopper cash... I suggest getting 45 degrees into Ilya Gurov and Anna Loleyt Bank of Russia ....The Process of Inflation Expectations. July 2010...It is a humdinger....

https://www.bis.org/ifc/events/5ifcconf/gurov.pdf

Also if the urge persists enough to take one hour and twenty seven minutes out of your life, then the recent LSE...Rethinking the Global Monetary System with Bank of India talented Raghuram Rajan lecture which broaches the theory behind Peoples QE.

https://www.youtube.com/watch?v=SHnCazIdY6I&feature=youtu.be

Cabinet approves Y13.5 tril economic stimulus package will not solve the underlying issue... arrow number 3

2 ( +2 / -0 )

Since Abenomics is an obvious failure with the third arrow not firing, this economic package is actually an economic suicide package. Abe will repeat this till he leave office and blame Kuroda for bad BOJ policy. Whoever succeed him will see a massive Yen devaluation, making average Japanese poorer.

3 ( +3 / -0 )

"At least there are some of us here who can leave...."

yeah, you can go to Europe, the world's biggest economic bloc, with borderless trade -- just like you advocate -- and free labor movement and the "efficiency" of a single currency -- just as the business community long advocated.

Think of the advantages! An average GDP growth of an astounding 0.36% over the past 20 years. However, youth jobless rate over 50% in several countries!

People who see Japan's slow GDP growth as somehow unique are living in fantasyland.

-1 ( +1 / -2 )

yeah, you can go to Europe,

Like he said, "but with other countries following in Japan's economic footsteps, and likely to catch fire when Japan implodes, it might not do us much good."

2 ( +2 / -0 )

People who see Japan's slow GDP growth as somehow unique are living in fantasyland.

What I see is that whatever "growth" Japan has had seems to have come mainly from government intervention. Where do you think the money siphoned from the taxpayers from the last 17 stimulus spending programs has gone? If you subtract that spending from the bottom lines of the companies which received it, you will find Europe's growth rate enviable when compared to Japan's.

As for high youth unemployment, at least such a labor pool exists, and an be put to work when work needs to be done. I see this as a good thing, because these youths will eventually find a way to make money, and more than a few will become successful in the long run. These youths will be the future of Europe's economy, and hopefully they will create the businesses and jobs for future generations.

If Japan continues to mismanage it's economy toward collapse, as the third-largest economy, this collapse will be felt in every other economy. Economic mismanagement by all developed countries is setting the stage for a potential collapse greater than the depression. Currency is being printed out hand-over-fist to finance and devalue national debts, interest rates are now so low, or even negative, that banks cannot earn profits conventionally, and they must seek riskier investments in hope of earning a return. Corporate debt is a record levels, much of this debt is incurred to buy stock, pumping up the market to artificial highs. Have you looked at the PE ratios of the major markets lately? And now large investors speculate far more about how much central banks are going to pump, rather than how well companies will perform, or about what new products or technologies will cause demand in the future.

Prior to 2008 there as a lot of noise about the "housing bubble", and the coming of an inevitable collapse. This collapse occurred, though there were some who claimed such a collapse was unlikely, or even impossible. We all know such was not the case. The noise now is even louder, yet those in government and people like yourself put your fingers in your ears, and think that things will be okay if only we can spend a little more money which the economy doesn't have.

3 ( +4 / -1 )

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