Abenomics: Japan's economic revolution will rock our world. BOJ blows big bubble say experts.; Japanese people have a bubble every 50 years. Once Japan does have a bubble they do it really big.
Tweet Topic Started: 22 Jan 2013, 12:01 PM (13,752 Views)
So, Japan may not slide into genteel oblivion after all. To the surprise of the Japanese, their country is smack in the middle of two riveting dramas that threaten to upturn the global strategic landscape in short order.
We all watch with disbelief as China and Japan rattle sabres over the Senkaku-Diaoyu islands, so like events that drew Europe’s alliance systems into conflict from 1911 onwards.
Both graduated to fighter jets last week: Japan sending in F-15s; China deploying J-10s, and mobilising the East China Sea fleet for live ammo drills. China’s purpose is to test Washington’s willingness to get behind its Asian allies at the risk of conflict. That is courting fate.
Against this, Japan’s economic policy revolution seems tame. Yet forces are being unleashed that could rock the world’s asset markets and trading system. Premier Shinzo Abe has vowed an all-out assault on deflation, going for broke on every front with fiscal, monetary, and exchange stimulus.
This is a copy of what happened in the early 1930s under Takahashi Korekiyo, the first of his era to tear up rule book and pull his country out of the Great Depression. He took Japan off gold in December 1931. He ran ‘‘Keynesian’’ deficits, launching a New Deal blitz before Roosevelt.
He compelled the Bank of Japan (BoJ) to monetise debt until the economy was back on its feet, draining the liquidity later. He devalued the yen by 40 per cent.
Japan’s exports swept Asia, ultimately causing the British Empire to retaliate - and there lies the rub, you might say.
Takahasi was assassinated by army officers in 1936 when he tried to cut military costs. Policy degenerated. Japan later lurched into hyperinflation.
Few dispute that Japan pioneered the world’s most successful experiment from 1932 to 1936. The trick was to hit hard and combine all forms of stimulus, each leavening the other.
Monetarists say Japan’s mistake over the past 20 years has been to launch one spending spree after another without monetary backing. The result has been to push net public debt to 145 per cent of GDP this year (or gross debt of 245 per cent) without reaching ‘‘escape velocity’’.
The BoJ sat of on its hands for a decade. Only later did it buy bonds, but in dribs and drabs, on short maturities, from banks instead of the public, in a half-hearted spirit.
Mr Abe has lost patience. This time the BoJ will do what it is told. The next governor must be a soulmate ‘‘with the will and ability to pull the nation out of deflation’’, he said. Leaks suggest that the BoJ will set an inflation target of 2pc this week, backed by unlimited bond purchases.
The Bank of Japan is set to unveil its most determined effort yet to beat years of economic stagnation, but the big challenge will be how to impress markets already pricing in a doubling of its inflation target and further asset buying.
Under pressure from new Prime Minister Shinzo Abe for bolder action to overcome deflation and lift the economy out of recession, the central bank will later today issue a joint statement with the government pledging to pursue aggressive monetary easing to achieve a target for inflation of 2 per cent, a level achieved in only a handful of months since the late 1990s.
Such a pledge will keep the BoJ under political pressure to deliver economic stimulus steps beyond its regular policy prescription of the past few years of topping up an asset-buying and lending program, analysts say.
"This will be a historical meeting for the BoJ that marks a big change in its policy framework, so the bank will be under pressure to deliver something new," said Masaaki Kanno, chief Japan economist at JPMorgan Securities.
"Doing the same thing it did in December won't be enough. The BOJ needs to show it has changed. Otherwise, we may see a reversal in the current yen-weakening trend," he said.
The yen has dropped 13 per cent against the US dollar in the past two months to hit a two-and-a-half-year low on expectations Abe will force the central bank into bolder action. Tokyo stocks have jumped by a fifth on the view the weaker yen will boost the export earnings of the likes of Nissan and Canon.
That leaves room for market disappointment, analysts say, if the central bank does no more than announce its new inflation target and raise the ceiling of its asset-buying program by 10 trillion yen, the most regular increment in policy easings of the past year.
Instead, policymakers will have to consider other measures to impress investors and keep pressure on the yen, considered key to Japan's economic fortunes as the country struggles with its fourth recession since 2001.
One option would be to make an open-ended pledge to buying assets. The ceiling on the current program is 101 trillion yen and it runs until the end of the year.
Another option would be to scrap a 0.1 per cent floor paid on short-term deposits at the central bank to encourage lending, sources have told Reuters.
A joint BoJ and government statement will likely set 2 per cent inflation as a medium-term target without a binding deadline. The hope is that modestly rising prices will lift the economy by encouraging consumers to buy before prices get any higher.
BOJ targeting 2% inflation 10y JGB at less than 1%
Something has got to give!
Japan is the land of permanent recession, possibly the economic orthodoxy has to change, instead of the rate it is applied.
Enjoy The Ride!
The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.” ― Friedrich A. von Hayek
"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
It makes sense that the country who first took advantage so much from globalisation and were the first to took all them jerbs from the west should be the one to fuck it all up now that seemingly their jerbs are being took.
China hates the Japanese, racist?
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
Japan now becomes the petri dish of mainstream economic theory. Abe has targeted inflation, the BOJ has lost is independence.
Hopefully, when this fails. We will see Krugman and his ilk slink from the limelight. We may be able to put this Keynsian garbage to bed.
Enjoy The Ride!
The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.” ― Friedrich A. von Hayek
"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
Japan now becomes the petri dish of mainstream economic theory. Abe has targeted inflation, the BOJ has lost is independence.
Hopefully, when this fails. We will see Krugman and his ilk slink from the limelight. We may be able to put this Keynsian garbage to bed.
All they want to do is create a small amount of inflation to end decades of deflation. You make it sound like they are about to totally explode the economy.
Dont listen to what they say. It is what they do that matters.
Andrew I expect South Korea and to a lesser extent Taiwan and China to be watching very closely. I dont think they will allow the Yen a free ride down.
Currency wars are starting to heat up the next year will be interesting.
It has been tried before, it did not work.
$15 milk in Japan may not make everyone feel richer.
I came across this comment in the blogosphere today, worth a chuckle.
"I fail to see why this is a problem. Much like in the US, when the debt coupon needs to be paid, just print more and raise the debt ceiling. To put it another way, if your home backed up with sewage and it started rising to the point where it approached the ceiling, would you deal with it, or raise the ceiling?
Any rational person would just simply raise the ceiling. Dealing with the shit is just too difficult."
The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.” ― Friedrich A. von Hayek
"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
All they want to do is create a small amount of inflation to end decades of deflation. You make it sound like they are about to totally explode the economy.
Dont listen to what they say. It is what they do that matters.
Andrew you can't have 2% inflation with the 10Y yield at less than 1%. The only reason any market participant buys a 10Y JGB at 1% yield is because what they lose on yield they make up on price deflation. i.e. purchasing power increases. If you turn that around and get 2% inflation, the bond market will go bidless. No one wants to pay the Japanese Government 2% a year to maintain their stupid policies.
Dammit, how do I embed videos from CNBC here?
The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary. H. L. Mencken
Catweasel say will there be a piddle on pants and on floor under Australian banker if a interest rate differential the close between Australia and a Japan?
During good the times, Australia the bank love fund & carry trade from japanese housewife and belgian dentist.
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