Outgoing BOJ chief Shirakawa says he failed on deflation


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He did best for Japan, and the history will tell. Too bad many do not appreciate his knowledge and experience.

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I, for once, would find it very difficult to ctitizice Mr. Shirakawa. Not only did he have to face a great international crisis in the form of the collapse of the Lehman Brothers bank in the United States, but also he had to contend with the huge crisis in the eurozone as a follow-up to the American crisis. And then just in case there were not enough problems to sort out, Japan endured the huge earthquake-tsunami in 2011 and subsequent nuclear power stations crisis...! Of course, political instability in Japan is never far away as prime ministers come and go, and everyone of them tries to meddle with the governor's work. Hopefully, the hard times may be about to turn the corner for Japan. The 'happy depression' that some say Japan is going through could come to an end in the near future if the new governor manages to achieve two per cent inflation as requested by the government of Mr. Abe. However, the japanese authorities need to keep up their promises to inject more money into the economy while the BoJ is trying to get rid of the Japanese negative inflation. The policy to pursue short term expansion of the Japanese economy may turn out to be what is required right now despite Japan's huge debt and inflation position. It is possible that the first results to all these new measures will have given some good results by summer. Otherwise, Shinzo Abe might be in for some protest votes in the summer elections. It would appear that at least the government of Japan is trying to do what some eurozone countries would have been well advised to do some time back had it been for the constraints posed by Germany. Time will tell who has been more on the right path to recovery. Regards.

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The maths just do not add up if the new BOJ achieves 2% inflation. The maths point to the government will be bankrupted because borrowing costs will soar. With Japan's government borrowing costs at super low of 5 yr at 0.17%, and 10 yr at about 0.6%, the debt interest costs already take up 50% of national annual budget.

With 2% inflation, JGBs yields then have to be at least 2%, what will happen to borrowing costs to cover debts at 240% of GDP? The JGBs bubble will burst and crashed, Nikkei will also be doomed.

2% inflation is an unwise target when the debts are serviced now at very low near zero rates. In perspective maybe Mr Shirakawa did a good job balancing both growth and inflation (borrowing costs of JGBs yields).

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