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Fresh monetary easing exposes cracks in Japan's growth blitz

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“The move by the BOJ shows that Abenomics is facing big problems. The economy is not growing, and is not showing the power to grow,” said Ivan Tselichtchev, an economics professor at Japan’s Niigata University.

“Thus the government and BOJ again have to resort to monetary alchemy. Again, it will have a stimulating effect, but only in the short term.”

Everyone who ever took just Econ 101 knew this. And, meanwhile, the pile of debt being passed on to the next generations just keeps on growing.

3 ( +6 / -4 )

Holy cow. I will be spending even less. Already expensive vegetables and fruit are off my table.

2 ( +4 / -2 )

And, meanwhile, the pile of debt being passed on to the next generations just keeps on growing.

I'm still amazed that people still equate government's debt (which is denominated in her own domestic currency) with that of regular household debt.

-9 ( +3 / -12 )

For better or for worse, the BOJ (along with the Japanese government) is taking a page out of the playbook of former GOJ governor and five-time Japanese finance minister Korekiyo Takahashi during the early 1930s — he was assassinated by military officers in the "February 26 Incident" of 1936 (they killed him for not printing more money to fund the war effort).

In 1981, during his days at Harvard Business School, ex-Fed Chairman Bernanke wrote. "Korekiyo Takahashi brilliantly rescued Japan from the Great Depression through reflationary policies in the early 1930s."

Takahashi ("Japan's Keynes") is credited with lifting Japan out of the Great Depression, before the U.S./Europe had recovered, by devaluing the yen, increasing the money supply, lowering interest rates, and large-scale deficit financing (BOJ printing cash to monetize government spending). Sound familiar?

Here is a well-written article on Takahashi and his reflationary strategy: http://globe.asahi.com/worldeconmy/090316/01_02.html

0 ( +2 / -2 )

The "cracks" will grow into a canyon.

3 ( +4 / -1 )

I feel really sorry for Japanese kids and the unborn too, when they join workforce in 10 and 20 years, they will be forced to pay off piled-up "overdue bills" left off by their deadbeat parents and grandparents who squandereed on unsubstantiated social programs.

Technically speaking, BOJ is “legally” robbing this country for an arbitrarily and unproaved 2% inflation rate. This is just a rotten thing to do.

1 ( +6 / -5 )

meanwhile, the pile of debt being passed on to the next generations just keeps on growing.

Unless it comes back to haunt the current generation first.

I'm still amazed that people still equate government's debt (which is denominated in her own domestic currency) with that of regular household debt.

Indeed there are important differences. What a household does in terms of it's borrowing isn't going to affect the value of the currency that they use. On the other hand, Abe's exercise in debt monetization has so far coincided with a relative depreciation in excess of 30% of the value of the yen (including a 5 yen loss against the US dollar in just 2 days after the BOJ's latest announcement).

But so long as the a sovereign can issue the currency in which their debt is denominated, they won't have to "default", which is surely the key in all this, right. They will certainly be able to achieve the necessary financial repression via more noble methods.

3 ( +3 / -0 )

I have been feeling this is a disaster for a few years now but unfortunately many don't agree with me. so i have lost quite a bit of money in the process.

-2 ( +1 / -3 )

Indeed there are important differences. What a household does in terms of it's borrowing isn't going to affect the value of the currency that they use. On the other hand, Abe's exercise in debt monetization has so far coincided with a relative depreciation in excess of 30% of the value of the yen (including a 5 yen loss against the US dollar in just 2 days after the BOJ's latest announcem

Neither does the government debt. Issuing, receiving, and paying or repaying are in yen dominations.

But so long as the a sovereign can issue the currency in which their debt is denominated, they won't have to "default", which is surely the key in all this, right. They will certainly be able to achieve the necessary financial repression via more noble methods.

I don't quite understand especially the last sentence.

-7 ( +0 / -7 )

Neither does the government debt.

I assume you mean you think it doesn't affect the value of the currency they issue, but I tend to disagree. I think the yen's depreciation in the wake of Abenomics, and the latest "easing" by the BOJ last week, is no sheer coincidence. A trillion yen is still a trillion yen, but 1 dollar is no longer 109 yen. What's up with that? Some coincidence?

2 ( +2 / -0 )

The "correct" way to manage government debt is to make sure it grows more slowly than your economy and/or your population. This is not happening in Japan, obviously, and it's why I continue to invest my money in the U.S. and not Japan (though I dearly love the country). Though I still support Abe-san, since they have to do SOMETHING, I don't know where this all will go.

2 ( +3 / -1 )

assume you mean you think it doesn't affect the value of the currency they issue, but I tend to disagree. I think the yen's depreciation in the wake of Abenomics, and the latest "easing" by the BOJ last week, is no sheer coincidence. A trillion yen is still a trillion yen, but 1 dollar is no longer 109 yen. What's up with that? Some coincidence?

That's the point. An individual that purchased a 10 year fixed rate JGB Bond and is about to marture tomorrow didn't even think nor cared about currency rates because it's irrelevant. Buys in yen, gets principal and interest paid in yen at maturity. Hence, your 'depreciation' only matters to those who speculate on FX.

-6 ( +0 / -6 )

I love the weakening of the Yen. I got lots and lots of dollars to spend on it.

-2 ( +2 / -4 )

Like someone said before, Japan's problem is mostly structural, not money deficit. QE can only work if the economy is not performing because there isn't enough money around, which is the problem with gold standard, no gold, no production, no consumption. Governments know this, and the only thing they can do is conjure more money so to be seen as "not doing anything" and kinda brush off the real structural issues, amakudari, women workforce, etc.

-5 ( +0 / -5 )

Nigelboy is correct on this. The fall in the yen is for the simple reason that due to QE and direct BOJ purchases, money which would otherwise be parked in a Japanese government account (which is all JGBs actually are) needs to be put somewhere else. Some will decide to look for returns abroad, and so the exchange rate will be pushed down until somebody else figures it's worth it to take those yen off their hands. Has nothing to do with so-called "debt monetization" which is just more econo-babble pumped out the MSM. Ask yourself, if the Japanese government is buying bonds off investors, what did the investors buy the bonds with? And when the BOJ buys directly, they are just cutting out this middle step. There is no "money printing" or "pumping money into the economy" going on, they are just shuffling yen between accounts. Right pocket to left pocket stuff. Only real question is if the BOJ and MOF guys actually secretly understand how things really work, or if they are just stupid and incompetent.

As for the usual "heaviest debt burden among rich nations" drivel, that is just standard 21st century financial ignorance. The Japanese government issues the yen when it spends, they don't borrow it from counterfeiters like Mrs. Watanabe, and they can NEVER run out of it. But they sure can screw things bad by not understanding that.

-4 ( +0 / -4 )

As Keyenes said, you cannot push on a string. Flushing the system with liquidity will do nothing for those with little to spend, and with consumer spending stagnant, the only sector to benefit is those exporting - and this is a shrinking sector.

It may be completely unreasonable to ask for creativity and flexibility from the Japanese government, but that is what is required now to put more disposable yen into the hands of consumers. For example, why not eliminate the sales tax on unprepared food, medicine and insurance? Why not provide more direct cash benefits to those caring for elderly? The Japanese government seems myopic when it comes to Keynesian spending: Construction or nothing. But with the Olympics coming and Tohoku still a mess, such spending really must be directed to areas which will immediately benefit - and which will immediately turn around and spend those yen.

0 ( +0 / -0 )

they are just shuffling yen between accounts.

Then what is the meaning of "government debt"? When the government spends more money that it collects in revenue, it borrows money to make up the difference. This money is borrowed at interest, and the principle and interest must be repaid, right? How is this different from household debt? RIght now, 26% of the revenue collected by the Japanese government is spent on debt-servicing costs, correct?

The government is "not shuffling yen between accounts" in the way you say. They have engaged in monetary easing, which means they are increasing the currency supply by adding to it. They are more or less creating yen out of thin air, and using this money to buy JGB's (assets).

As for the usual "heaviest debt burden among rich nations" drivel, that is just standard 21st century financial ignorance. The Japanese government issues the yen when it spends, they don't borrow it from counterfeiters like Mrs. Watanabe, and they can NEVER run out of it. But they sure can screw things bad by not understanding that.

You seem to forget the point that though the government may create the yen, the government cannot assign a value to it. The value is determined by the market. Like any commodity to be traded, the value is mainly determined by the supply. Increasing the supply beyond a reasonable amount devalues it, otherwise, why would governments bother to sell bonds? Why not just print money to pay their debts? The fact is that the government does sell bonds to raise money, and they must pay interest to their investors, right?

The amount of bonds outstanding is debt, isn't it?

The only reason that the the number of bonds outstanding (debt) is so high in Japan is because the bond market is more or less closed to outsiders, and these bonds are not sold upon the open market. Were they sold upon the open market, the rates would be much higher, because anyone with sense can see that the risk of investing in the Japanese economy is very high.

There is no potential for economic growth in a country where the population is falling rapidly, in which business practices are inefficient and antiquated, and which is facing strong competition from nearby neighbors with larger populations, and far lower labor and regulatory costs.

The greatest indicator of the prosperity of a country is the growth rate of it's population. How prosperous is Japan now? How about in the future?

2 ( +4 / -2 )

nigelboy,

Currency rates aren't irrelevant, they affect most everyone. That's why currency rates are reported in the "news" to the extent that they are.

Currency rates are far more relevant than the number of arbitrarily printed zeros on bank note for almost nothing. Without the currency rate to tell you how much a 20 trillion zimbabwean dollar bank note is worth relative to other things, what is the value of such money?

Guy_Jean_Dailleult,

Something for you to ponder is that Mr Abe has been telling anyone listening for 2 years that he is going to smash the yen, he has, and those savers who took heed have preserved their real wealth far better than those who thought it was all none of their business and just news for currency speculators.

Try calculating your wealth in US dollar terms as of 2012 (or another currency of your choice), and again as of now. What have you been doing for the past two years in order to achieve this result? For anyone saving purely in yen, it's been like trying to swim up a waterfall.

No one in Japan is obliged to hold their savings in any specific currency; it is entirely legal to have bank accounts in foreign currencies (and indeed overseas). Diversifying out of the yen under the Abenomics regime has proven a sensible strategy. Those who did so have more foreign currency to their name now than they would be able to obtain today due to the yen depreciation, and vice versa in nominal yen terms they also have more wealth.

Some seem to think this diversification behaviour is "speculation"; I call it self-preservation. No one is obliged to stay on board the ship when the captain declares he's going to sink it.

0 ( +2 / -2 )

An individual that purchased a 10 year fixed rate JGB Bond and is about to marture tomorrow didn't even think nor cared about currency rates because it's irrelevant. Buys in yen, gets principal and interest paid in yen at maturity. Hence, your 'depreciation' only matters to those who speculate on FX.

Nigelboy, have you

Buys in yen, gets his 0.07% annual interest paid... only to find that the prices of the things he's going to buy have increased by much more than that because the BOJ has diluted the yen in the interim, and the costs of things like imported energy have pushed consumer prices upward.

If JGBs were inflation protected, this might be different. But as it is, everyone who prudently invested in government bonds in the past few years, accepting returns like 0.1% per year thinking that that's still a positive return if there's no inflation, were stabbed in the back.

And these weren't players or speculators: these were the most risk-averse people in the country. When you betray them, why would anyone in Japanese society have any confidence about their future financial security?

3 ( +3 / -0 )

sangetsu03,

26% of the revenue collected by the Japanese government is spent on debt-servicing costs, correct?

Incorrect - I wanted to say you're too high, but sadly you're too low!

Debt-servcing costs are more like 50% of tax revenue. The 26% figure is compared to the expenditure side, which as we know is twice tax revenues.

I think I've seen this mistake made elsewhere, in either case it's not a pretty figure.

ThonTaddeo,

And these weren't players or speculators: these were the most risk-averse people in the country.

Indeed. The talk about GPIF reforms have focused on concerns about the money going into the stock market, or heaven forbid overseas assets. The questionable notion of JGBs being a safe asset doesn't seem to get a mention, even with Japan's sovereign credit rating below that of places such as milk exporting New Zealand.

2 ( +3 / -1 )

@sangetsu03

You can buy JGBond at securities firms or Post Office.

The greatest indicator of the prosperity of a country is the growth rate of it's population.

Many poor countries have high growth rate of population.

@fxgai

For the people in Japan who don't travel or do business outside, currency rates are irrelevant.

-3 ( +0 / -3 )

Sangetsu03

There is no potential for economic growth in a country where the population is falling rapidly, in which business practices are inefficient and antiquated, and which is facing strong competition from nearby neighbors with larger populations, and far lower labor and regulatory costs.

The greatest indicator of the prosperity of a country is the growth rate of it's population. How prosperous is Japan now? How about in the future?

Seems to me if you do think there is no hope and your business, your fathers business and his friends business is not doing so well as you mentioned in prior posts, and there is despondency in your outlook then maybe time to pull the plug and go elsewhere.

Personally I love what Abe and the BOJ have done , finally after 7 years some one has done something to try to lift this economy and successfully crashed the yen, Its great for my industry and wish it had of happened years ago.

114 today but where was the yen prior to Lehman crisis, cant see why everyone is suddenly making noise now when 7 years ago the yen was at lower or similar levels, there was no complaining then like there is now.

0 ( +2 / -2 )

tinaw, see above, but if you only eat natural grass or rocks then OK currency rates are irrelevant. Most people consume lots of things the price of which are impacted by currency rates. Kuroda's whole plan to boost inflation is essentially by depreciating the yen. This is relevant to most people, I should think.

StormR, Yes but people were saying similar things when it moved back above 100 as well. I doubt it'll hang around 114 for long personally, 125 seems probable to me in the next 6 months or so, and unless there are some policy changes here I don't expect it will stop there either.

2 ( +2 / -0 )

I'm still amazed that people still equate government's debt (which is denominated in her own domestic currency) with that of regular household debt.

And I'm still "amazed" that folks who have no grasp of macro-econmics still feel compelled to comment on it. I did NOT equate government debt with regular household debt as you state. How did you possibly reach that conclusion?. But what amazes me is your ignoring the fact that at some point, regardless of which currency it is in, the debt becomes due, and the future generations of Japanese are the ones who have to face this issue. Likewise, the higher the debt goes, even if it is at a very low rate, the annual carrying costs continue to rise. Which means a larger and larger share of the annual national budget has to be devoted to a non-productive area, at a time when Japan can ill afford it, because of the aging population and the attending rise in social costs/pensions.etc. So, as a result, the government is forced to raise taxes, which again, comes right out of the pockets of these younger people.

0 ( +4 / -4 )

"So, as a result, the government is forced to raise taxes,"

Not if it issues its own currency to meet the obligation. Which is does. Not if it already owns a large portion of its own debt, which it does. Which means...your premise is flawed.

-1 ( +1 / -2 )

How is this different from household debt?

They are more or less creating yen out of thin air, and using this money to buy JGB's (assets)

I think you just answered your own question. Unless of course you have a personal yen creation machine, in which case could you please share it with the rest of us.

No one in Japan is obliged to hold their savings in any specific currency; it is entirely legal to have bank accounts in foreign currencies (and indeed overseas)

That's fine. So you exchange your yen for a foreign currency in a floating exchange rate system, maybe you win, maybe you lose. Maybe the guy who now has your yen wins, maybe he loses. But it makes no difference who holds the yen, nothing has changed except the exchange rate.

Increasing the supply beyond a reasonable amount devalues it, otherwise, why would governments bother to sell bonds?

Governments sell bonds because corporate welfare is very profitable. No other reason.

0 ( +2 / -2 )

Some posters think the steep depreciation of yen will cast little impacts on many Japanese who don’t travel abroad. Such assertion is incorrect. Here is why: Japan is a country as we know it that is lack of many essential natural resources, therefore, it has to import significant amount of stuffs around the world from food to raw commodities.

Now, since yen is devalued, as a direct result, that inevitably increases the costs of many imports; given time these extra costs will pass to goods and services that Japanese buy on daily basis. In other words, even majority of Japanese may forego their leisure of travel outside Japan, they will have to pay more gradually. for their purchaes at home.

BTW, that’s the logic and toolset that deployed by BOJ to jack up the inflation artificially through currency manipulation.

A group of Senators and House members (mostly from GOP side on the hill) have already expressed serious concerns about BOJ’s move of yen devaluation. In addition, Japan’s trade partners such as EU. S.K and China also watch BOJ’s move closely and evaluate their options in the meantime. Although it’s too early to say a currency war is looming large, there is decent chance that some countries may take counter measure as well. If that happens, Japanese people could get hurt more on thier wallets.

One more thing, Japan’s annual interesting payments resulted from its public debts agaist its tax revenues are unproportional if you take into accounts of Japan’s GDP growth, and productivity growth and population growth. The US also has high interesting payments of its public debts (which is awful too because of the wars carried out last decade ) but it may fare better than Japan in long run.

-1 ( +2 / -3 )

fxgai, I don't think yen goes to 125 so fast, but if it does, so what? It has a positive side as well. Exporters will be happy, and even some J companies outside may come back to Japan. Then more jobs in Japan.

0 ( +1 / -1 )

@Tina, " even some J companies outside may come back to Japan. Then more jobs in Japan." that may be true to some enxtent, but in terms of J-companies return to Japan to reestablish production bases in Japan, that is easy say than done. The costs to do such move are significant no to mention the time time consuming and front-end investment required.

-3 ( +1 / -4 )

Not if it issues its own currency to meet the obligation. Which is does. Not if it already owns a large portion of its own debt, which it does. Which means...your premise is flawed.

Jeff -- sheer simplistic nonsense. Issuing more currency to meet the financial obligations just weakens the yen further, and creates more pain for the people of a country dependent on imports for much of their energy and food. Also, it does not matter who holds the debt, the interest still has to be paid. Or have you missed the fact that over 40% of the annual tax revenues goes towards interest payments? Raising taxes, short of a sustained economic boom, which we both know is not going to happen, is the only real option available.

-5 ( +0 / -5 )

jerseyboy, Interest payments from government go to BOJ, but J govt is the largest shareholder of BOJ. So, dividents go to J govt.

Raising taxes... is the only real option available.

Not really. I can think of at least three other ways.

-1 ( +0 / -1 )

Flooding the markets with artificial liquidity is first and foremost designed to weaken the yen, depress imports and promote exports. Don't expect other countries to stand on the sidelines cheering Abe on. Beggar thy neighbour policies such as this will boomerang back on Japan as others follow suit with counter-measures designed to blunt the impact of Japan's unilateral declaration of currency war. Those predicting 150 yen to the dollar may be in for a shock, as the big overseas players come up with their own stratagems to stymie the BOJ. The US and Europeans would be far happier with a stronger yen, facilitating their own export lead recoveries so in a few months, when the dust has settled, the yen may well have been jawboned upwards.

0 ( +1 / -1 )

Currency rates aren't irrelevant, they affect most everyone. That's why currency rates are reported in the "news" to the extent that they are.

You're not comprehending.

First of all, I never said currency rates, in general, are irrelevant. What I stated was that a person that purchases a 10 yr or 5 yr bonds don't go wondering about what the yen rate is going to be when it matures. Furthermore, the question of what the 'yen' would be worth compared to when it matures is also irrelevant to the purchaser also doesn't take consideration of inflationary or deflationary period during the term period.

Again, this is not a household finance where if you buy a TV, the money simply disappears to the person who bought them. The money (which is yen) will be circulated, changing hands, dispersed, etc. but it does not disappear into thin air.

-2 ( +1 / -3 )

jerseyboy, Interest payments from government go to BOJ, but J govt is the largest shareholder of BOJ. So, dividents go to J govt.

tina -- wrong. Yes, the BOJ owns the largest share of J-government debt, but that is only 20%. Don't you think the folks who own the other 80%, like insurance companies, expect to get paid. Where does that money come from?

Not really. I can think of at least three other ways

OK, name them.

-3 ( +1 / -4 )

A group of Senators and House members (mostly from GOP side on the hill) have already expressed serious concerns about BOJ’s move of yen devaluation. In addition, Japan’s trade partners such as EU. S.K and China also watch BOJ’s move closely and evaluate their options in the meantime. Although it’s too early to say a currency war is looming large, there is decent chance that some countries may take counter measure as well. If that happens, Japanese people could get hurt more on thier wallets.

Methinks you haven't read the report by the U.S. Treasury on "Report to Congress on International Economic and Exchange Rate Policies". In this report, there are no mention of such for Japan but for Korea and China,

"China should allow the market to play a greater role in determining the exchange rate. This includes refraining from intervention within the band and adjusting the reference rate if market pressures push the exchange rate to the edge of the band. In line with its S&ED commitments, China should build on the apparent recent reduction in foreign exchange intervention and durably curb its activities in the foreign exchange market. We will continue to monitor these issues closely going forward. In line with the practice of most other G-20 nations, China should disclose foreign exchange market intervention regularly to increase the credibility of its monetary policy framework and to promote exchange rate and financial market transparency"

"Japan has not intervened in the foreign exchange markets in three years...."

"On a real trade-weighted basis, the yen has depreciated by 23 percent from October 2012 through August 2014. In its last Article IV Consultation Report for Japan (July 2014), the IMF assessed the yen’s real effective exchange rate to be broadly consistent with the economy’s medium-term fundamentals, while noting the very large uncertainty about its assessment given the major changes to Japan’s economic policies."

"The increase in Korea’s reported reserves though understates the actual intervention, as the Korean authorities also increased their net forward reserve position by $13.4 billion from the end of December 2013 to August 2014. Given Korea’s sizeable current account surplus, large reserves, and undervalued currency, the won should be allowed to appreciate further. The Korean authorities should limit foreign exchange intervention only to the exceptional circumstance of disorderly market conditions, increase transparency of foreign exchange intervention, and ensure that macroprudential measures clearly focus on reducing financial sector risks – in design, timing, and description – rather than alleviating upward pressure on the exchange rate."

FYI, this report was issued after the initial "Kuroda Bazuka".

-2 ( +0 / -2 )

Problem is that there is a fixation by U.S. on the renminbi that is a classic case of political denial. With U.S. workers remaining under intense pressure in terms of both job security and real wages, politicians have understandably been put on the spot. They have fixated on the China of a long-gaping trade deficit, charging that currency manipulation is the culprit to the long festering problems of the American middle class. This argument is politically convenient, but wrong. The U.S. trade deficit is a multilateral imbalance with many countries and not a bilateral problem with China. It arises not from the alleged manipulation of the renminbi, but from the simple fact that America does not save. Yes, trade with China is the largest component of this imbalance, but that largely reflects the complexity of multinational supply chains.

-3 ( +0 / -3 )

Problem is that there is a fixation by U.S. on the renminbi that is a classic case of political denial. With U.S. workers remaining under intense pressure in terms of both job security and real wages, politicians have understandably been put on the spot. They have fixated on the China of a long-gaping trade deficit, charging that currency manipulation is the culprit to the long festering problems of the American middle class. This argument is politically convenient, but wrong. The U.S. trade deficit is a multilateral imbalance with many countries and not a bilateral problem with China. It arises not from the alleged manipulation of the renminbi, but from the simple fact that America does not save. Yes, trade with China is the largest component of this imbalance, but that largely reflects the complexity of multinational supply chains.

Copy/paste job from sfjp330 once again, passing it off as his own. Pathetic.

http://www.project-syndicate.org/commentary/stephen-s--roach-assesses-the-damage-caused-by-america-s-renewed-focus-on-the-chinese-currency-s-exchange-rate

Does it really kill you to credit the 'source'?

-3 ( +1 / -4 )

Just read on Japan times it made the rich richer. When will it trickle down?

0 ( +1 / -1 )

OK, name them.

How about more printing as one? I don't want to scare people, and it's just my ideas. As the last resorts, there are several ways I can think of to avoid default (if any). If I can think of several, maybe you can too. In any event, inflation is a good thing when you have debt.

-2 ( +0 / -2 )

Japan manipulates its currency ooooh wow, how about china been doing it for years.

How about read this

http://www.japantoday.com/category/opinions/view/the-takeaway-from-six-years-of-economic-troubles-keynes-was-right

How about understand the weak yen is a bonus for japan business and its good for the overall economy, those in charge don't care about if your petty little house keeping budget rises a few yen, there is more at stake.

-1 ( +1 / -2 )

Guy_Jean_Dailleult,

That's fine. So you exchange your yen for a foreign currency in a floating exchange rate system, maybe you win, maybe you lose.

The winning part is straight forward - work and save.

The point of diversifying one's savings across multiple currencies is not to lose through the deeds of some politician and central banker that you never voted for. If you diversify your savings in multiple currencies, there's only so much damage that they can do, but if you've got all your eggs in the one basket (theirs) you are more vulnerable.

it makes no difference who holds the yen, nothing has changed except the exchange rate.

The exchange rate is not just a number, it's how much the currency is relatively worth.

tinawatanabe,

fxgai, I don't think yen goes to 125 so fast, but if it does, so what? It has a positive side as well. Exporters will be happy, and even some J companies outside may come back to Japan. Then more jobs in Japan.

Sure it has it's positive side, but anyone who has worked and saved in Japan over the past 5 years will be getting screwed. There's no need to be tied 100% to the yen. I'm not saying anyone should dump all of their yen immediately either. Gradually doing so over time is the way to go. Eventually once you are diversified, then currency movements do become less relevant.

jerseyboy,

Raising taxes, short of a sustained economic boom, which we both know is not going to happen, is the only real option available.

I think they are going to have to slash social security spending too, they can't allow the costs to keep increasing at a rate of 1 trillion a year.

oyatoi,

Those predicting 150 yen to the dollar may be in for a shock, as the big overseas players come up with their own stratagems to stymie the BOJ.

A fair point. However while jawboning has it's short term effects, they can't stop the BOJ monetizing the Japanese government debt the way they are. And they can only stop outflows from Japan's trade deficit by buying more Japanese exports. They can really only outdo Japan by crashing their own economies Lehman/Greece style, or implementing even more extreme policy than the BOJ, IMO. But over time, if the BOJ fails to achieve their inflation target then I can see the yen strengthening again.

0 ( +0 / -0 )

The real question: How long to default?

0 ( +0 / -0 )

They won't necessarily default, they can just issue extra debt and have the BOJ buy it.

What some don't want to accept is that such behaviour itself has it's consequences, as the 30% depreciation of the yen in 2 years hints at.

-1 ( +0 / -1 )

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