Gov't eyes new economic package to fight inflation, weak yen

The nexus between unbridled credit expansion and its corollary of environmental collapse, growing inequality, and the breakdown of social order has become increasingly clear. After decades of accelerationist excess, we’re now seeing an evisceration of capital without parallel. That’s the good news.

Because the BOJ has chosen to keep its monetary policy loose, as core inflation is only 2.6 percent

Or 2.8, but either way, it is above target, and inflation is raging out of control overseas, yet still the BOJ persists with the policy while the government throws away trillions of yen worth of dollars to try to hold it up.

Higher rates aren't very effective against cost-push inflation. 

First thing first, the BOJ should stop printing a rate of tens of trillions of yen per year. If they can’t even stop printing, rate hikes are not likely.

I dont get that. Why does debt means the BOJ must continue "printing yen"?

To monetize the ongoing profligate spending.

What about the govt? It prints yen every time it spends. Can it continue?

It can’t, no. The government can’t forge money in its bank accounts anymore than you or I can. 

The money is only there to be spent by government AFTER they sell new debt, and that debt is only able to be sold because the primary market dealers know that (for now) the BOJ is going to buy the debt off them.

Another strident argument based on... speculation.

It’s not speculation.

The market price JGBs over the years of BOJ money printing is known. Hiking interest rates entails reducing the price of those bonds held, and it wouldn’t be very high before 500 trillion yen of bonds held by the BOJ is no longer worth that much if marked to market under higher interest rates. That’s bad news for the BOJ’s balance sheet, and the value of the yen sits on the other side of that balance sheet.

Speaking of speculation, people think that Kuroda's successor in April will tighten policy, under political pressure. If they do, I shall be re-visiting this argument of yours.

Good for us to find some common ground!

I have no idea what they are thinking, personally, other than that they are confused about what to have their new BOJ chief do. Buying yen while they have the BOJ print it is contradictory, but they seemingly thought doing something contradictory would be better than doing nothing.

I hope, but don’t expect, they would make serious moves to run a balanced budget for a change. That much would send a positive message, in the short term. It’s a big hole, but stopping digging be the first step.

fxgai

Japan’s currency is down against all major currencies this year...

Because the BOJ has chosen to keep its monetary policy loose, as core inflation is only 2.6 percent and is primarily cost-push, while the other economies are forced to hike rates in the face of stronger demand-pull inflation. Higher rates aren't very effective against cost-push inflation.

And the massive accumulated debt and ongoing annual deficits that are not far short of total tax revenues, means that the BOJ cannot stop printing more yen

I dont get that. Why does debt means the BOJ must continue "printing yen"? What about the govt? It prints yen every time it spends. Can it continue?

"...raising short term interest rates, which would also crash the value of the bonds..." 

Another strident argument based on... speculation. Speaking of speculation, people think that Kuroda's successor in April will tighten policy, under political pressure. If they do, I shall be re-visiting this argument of yours.

Hot air just flows up,not down.

Companies received a fair amount of money during Covid but did their staff?

A company I worked for part time never offered me a yen out of its benefits.

I am not the only one…

Japan’s currency is down against all major currencies this year - not just the king US dollar. That’s right, last week the UK mini budget (containing unfunded subsidies for energy) is said to have “crashed” the British Pound… except that the yen is down versus the UK currency on the year.

Japan’s yen weakness is the story, not the US dollar strength.

And the massive accumulated debt and ongoing annual deficits that are not far short of total tax revenues, means that the BOJ cannot stop printing more yen, let alone contemplate raising short term interest rates, which would also crash the value of the bonds that the BOJ has hovered so far.

@fxgai

But with this much debt accumulated, the only good options are the hard options...

Could you explain what role Japan's fiscal debt plays in Japan's cost-push inflation situation and the rising value of the US dollar?

Electricity price kWh in EU?

How much does a kWh cost in the UK in 2022? roughly 36p/kWh. ¥58. 

Italy ¥56/kWh.

Japan ¥25/kWh

A good chunk of this inflation is cost push/uncertainty from energy and food prices, exacerbated by the Ukraine war and sanctions imposed against it. Another chunk is the world returning to normal after lockdowns.

There's a good chance this will be temporary, no-one should want the war to drag on for years, or wish for more lockdowns, so maybe just try and ride this out. The Japanese government is very good at printing money without having to crank up interest rates or watch on helplessly as the currency tanks, so why not do a bit more. A certain European country just introduced a (neoliberalism-driven) budget that tanked its currency and forced its central bank to promise unplanned QE to save pension funds that were hours from insolvency. Compared to that, Japan is a beacon of competency.

higher electricity bills amid surging natural gas prices caused by Russia's war in Ukraine,.

its a lie.pure lie.

this happened because of your santcions against Russia that backfires back at you and will do in near winter season/just ask eu citizens how are they "happy" with their "defeat" orf Russia by their sanctions.../

wondering how one PM can lie that easy to own citizens-does he think that all of us are some bunch of .diots?

It seems that Japan is in a race with the Brits to see who can have the weakest currency amongst G7 members.

Until the voters stop electing the LDP, the LDP will continue to deficit spend, because that’s the only clue they have. JT commenters have rightly identified the ridiculous contradictions in current policy settings.

But with this much debt accumulated, the only good options are the hard options and the politicians here have no guts.

"I'm aware of the various views and criticisms expressed by Japanese people," Kishida said. "We take them seriously and learn from this."

No you don't.

The govt never takes the concern and will of the people into account - unless it serves it's own means.

A weak yen is good, or is it bad?

It used to be good, when Japan's economy was less globalized. But its companies have offshored so much of their production and became dependent on overseas suppliers in recent years that now it's generally bad. In addition, a cheap yen raises the prices of energy and other essential imports.

No wonder more and more people are calling for the end of globalization. Bring it on!

It would take you two seconds to do a Google search and find all kinds of articles from the past 20 years that say deflation had to be fought here in Japan. Now we "finally" have inflation, and it is suddenly the Great Enemy. WTH?! And comparatively speaking, people all around the world wish they had our inflation rate. In short, these so-called policies are just more ways to hand out money to the friends of the LDP while at the same time showing the electorate that politicians are "doing something." Sad.

And TBH, I can't imagine anything politicians can do that will help strengthen the yen as long as the discrepancy exists between interest rates here and in the US. I hope I am wrong, but 2023 could see the yen hit over 150 yen to the dollar and there is really only one thing Japan can do to stop that and Kuroda and Co. won't budge on raising interest rates here. Sigh.

Am I the only one reading this backwards?

The BOJ is pushing for inflation of about 2% and the the central government is spending billions fighting inflation, INFLATION itself must be confused too, can't decide which way to go Up Or Down, LOL

So let me guess, a 1 time payment of 100,000yen to magically make the problem dissapear?

"I'm aware of the various views and criticisms expressed by Japanese people," Kishida said. "We take them seriously and learn from this."

Never falser words were spoken, as evidenced by the next sentence.

In addition to "bold measures" focusing on the three priority areas,

Also evidenced by the fact that these measures are always 99% corporate welfare with zero to none relief to the populace affected.

I'm receiving conflicting messages.

A weak yen is good, or is it bad?

Seems like just yesterday they were scheming to fight deflation.

Gov't eyes new economic package to fight inflation, weak yen

Is that just giving money away again, without solving actual problem?