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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.
Topic Started: 22 Jan 2013, 12:01 PM (13,764 Views)
Miles McCarthy
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Andrew Judd
22 Jan 2013, 10:40 PM
The idea is to create some inflation and turn around the long standing deflation psychology. A large amount of the government debt is held by japanese who get a low income from that debt. An increase in their income is not a bad thing if you want to create inflation.

Wrong. Any inflation will wipe out the returns from JGB. How difficult is this to understand? 1% yield and 21% inflation over ten years is -20%, yes MINUS 20% real yield! Do you want to put your retirement savings into an investment that loses 20% over ten years? What makes you think anyone else does?

The reason that investors buy JGB at 1% yield over 10 years is deflation. Period. If there is inflation, the value of the bonds will decrease by that amount as investors sell them down.

The Japanese Government currently pays 25% of tax receipts servicing the interest on their debt. At an annual interest rate of 9 basis points, if bond yields go to 50 basis points, that is the entire tax base on interest, much less 250 basis points.

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Finland has had negative yields and there seem seems to be inflation in Finland and the wider Euro area. If investors think the governments policies are good for buisiness, or the situation elsewhere is so uninspiring, you could have low yields and inflation.

But Japanese conglomerates are already voting with the feet. Yen is already leaving Japan to buy foreign assets.
Edited by Miles McCarthy, 22 Jan 2013, 11:40 PM.


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

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Enjoy The Ride
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Andrew another point you may like to consider, for every 1% rise in JGB yields Japanese banks will lose 15% of their Tier 1 capital. They are large holders of JGB's and yield is a function of price. This problem is not as simplistic as you make it.
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.


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Miles McCarthy
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Andrew Judd
22 Jan 2013, 11:14 PM
If Japan succeeds in creating a small amount of inflation why is Korea going to suddenly rush out and create more inflation than they already have?
You are seriously asking this question.

If you have a trade surplus, the lower your currency is in relation to your trading partners, the cheaper your goods are for them, and the higher volume of those goods you can sell.

Guess what? Korea exports cars, consumer electronics, telecommunications, semi-conductors, ships and Oh look! So does Japan!
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You appear to be in denial that the Japanese appear to have deflation and wish to change that.

You appear to be in denial of that the consequences of inflation will be.

Edited by Miles McCarthy, 22 Jan 2013, 11:49 PM.


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

.
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Andrew Judd
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Enjoy The Ride
22 Jan 2013, 11:38 PM
Andrew the Japanese wish to create inflation and economic growth at the expense of it's neighbours.
Korea, Taiwan and China will not have their markets eroded by yen devaluation, they will participate in the currency war.

We are not talking about QE here we are talking about deficit spending with unsterilised bond purchases by the BOJ

But,you have stumbled onto the real problem.




Would you feel confident investing in a country where 30 years of Government and Central Bank intervention have resulted in one recession after another?

The average Japanese saver is only concerned on the return of their investment, not the return on their investment. The cure for this is a real functioning market.
An environment where Government and their instruments are not the market, but the fundamentals of risk and return are present.

How can a rational human being take a position in any market or invest capital, when they are aware of the risks of Govenment policy changing course on a daily basis?
You are getting muddled up over QE

QE is not sterilised. QE is not particularly inflationary

The issue is the amount of government deficit spending. Ie if it remains the same nothing much different will happen with QE.

And i see yet again you are in denial about the true position of the government and BOJ for the last 20 years. You seem determined to spread the falsehood that the BOJ and government of Japan have tried to end deflation in a determined coordinated manner
Miles McCarthy
22 Jan 2013, 11:39 PM
Wrong. Any inflation will wipe out the returns from JGB. How difficult is this to understand? 1% yield and 21% inflation over ten years is -20%, yes MINUS 20% real yield! Do you want to put your retirement savings into an investment that loses 20% over ten years? What makes you think anyone else does?

The reason that investors buy JGB at 1% yield over 10 years is deflation. Period. If there is inflation, the value of the bonds will decrease by that amount as investors sell them down.

The Japanese Government currently pays 25% of tax receipts servicing the interest on their debt. At an annual interest rate of 9 basis points, if bond yields go to 50 basis points, that is the entire tax base on interest, much less 250 basis points.



But Japanese conglomerates are already voting with the feet. Yen is already leaving Japan to buy foreign assets.
The idea is to create a small amount of inflation

Evidently we cannot discuss this and we might as well watch to see if Japan can first create inflation, before we then decide if Japan is about to have hyperinflation.

:pop:
Edited by Andrew Judd, 23 Jan 2013, 05:23 AM.
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Count du Monet
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Quote:
 
The idea is to create a small amount of inflation


Already perpetual central bank policy. As they say, they target 2 - 3% cpi pa. Small inflation has been with us for a century.

So small inflation is a lie.....they want medium inflation.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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Enjoy The Ride
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Andrew Judd
23 Jan 2013, 05:13 AM


And i see yet again you are in denial about the true position of the government and BOJ for the last 20 years. You seem determined to spread the falsehood that the BOJ and government of Japan have tried to end deflation in a determined coordinated manner

The idea is to create a small amount of inflation



Andrew WTF? Are we talking about the same Island in the Pacific Ocean?

The fact the Japanese Govt has managed to rack up 13.6 Trillion in debt (Deficit spending)

and this from the BOJ in 2010

"taking into account that there is little room for a further decline in short-term interest rates, the bank will encourage the decline in long-term interest rates and various risk premia to further enhance monetary easing… The purchase of long-term government bonds through the programme will be conducted as a temporary measure, and will serve a different purpose compared with the existing purchase of long-term government bonds. Therefore, the bank’s holdings of long-term government bonds purchased through the programme will be treated differently from the long-term government bonds purchased within the ceiling of the amount of banknotes in circulation."

So your asserting up till now, the Japanese Govt and the BOJ have been doing nothing, to TRY end deflation.

Guess what, it didn't work. Not because it is an economically bankrupt ideal......

Because they didn't do enough!!!

Andrew please tell me how much deficit spending do you think will be required to produce this small inflation?


Jens Weidmann Bundesbank chief had this to say;

"Already alarming violations can be observed, for example in Hungary or Japan, where the new government is interfering massively in the business of the central bank with pressure for a more aggressive monetary policy and threatening an end to central bank autonomy.
So far the international currency system has come through the crisis without a devaluation competition, and I hope very much that remains the case"







Edited by Enjoy The Ride, 23 Jan 2013, 12:51 PM.
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.


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Andrew Judd
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Enjoy The Ride
23 Jan 2013, 08:26 AM
Andrew WTF? Are we talking about the same Island in the Pacific Ocean?

The fact the Japanese Govt has managed to rack up 13.6 Trillion in debt (Deficit spending)

and this from the BOJ in 2010

"taking into account that there is little room for a further decline in short-term interest rates, the bank will encourage the decline in long-term interest rates and various risk premia to further enhance monetary easing… The purchase of long-term government bonds through the programme will be conducted as a temporary measure, and will serve a different purpose compared with the existing purchase of long-term government bonds. Therefore, the bank’s holdings of long-term government bonds purchased through the programme will be treated differently from the long-term government bonds purchased within the ceiling of the amount of banknotes in circulation."

So your asserting up till now, the Japanese Govt and the BOJ have been doing nothing, to TRY end deflation.

Guess what, it didn't work. Not because it is an economically bankrupt ideal......

Because they didn't do enough!!!

Andrew please tell me how much deficit spending do you think will be required to produce this small inflation?


Jens Weidmann Bundesbank chief had this to say;

"Already alarming violations can be observed, for example in Hungary or Japan, where the new government is interfering massively in the business of the central bank with pressure for a more aggressive monetary policy and threatening an end to central bank autonomy.
So far the international currency system has come through the crisis without a devaluation competition, and I hope very much that remains the case"






One of the first things i said to you about one month ago was that the BOJ appears to have been undemocratically attempting to reform the Japanese economy and this was described by Richard Werner who argued also in the late 1980's that the reinflationary policy of BOJ by supplying the banking system with reserves was not going to work. Your comment to that was that others had said similar things. The new prime minister has told the BOJ not to defie the will of the people for a good reason.

You seem stuck in your Austrian groove on this topic.

Weidmann cannot possibly think that countries like the USA and UK have not already engaged in competitive devaluations.

A part of the problem with Spain and co is that they are stuck in the Euro and cannot devalue their currencies.

Weidmann is playing the German game where the periphery have to work to correct their situations without German getting devalued repayments of money that German foolishly lent to the periphery.

Ever since the Euro was introduced it has been rapidly devalued. Trichet was forever on about the mandate he had been given by the people for price stability but all the ECB really cares about is the banks. Where was the ECB while the disaster was unfolding when it has very low interest rates and Germany was shovelling money like no tomorrow towards Ireland spain and so forth?

Dont listen to what people say so much. It is what they do that matters.
Edited by Andrew Judd, 23 Jan 2013, 05:16 PM.
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Japan's jump to the right a concern

January 25, 2013 - 1:46PM
Michael Pascoe

A little history lesson in The Economist magazine last week reminded readers that the Japanese Prime Minister, Shinzo Abe, was the son of a former Japanese foreign minister and grandon of Nobusuke Kishi. Kishi was a prime minister and a member of the Japanese cabinet that declared war on the US. He spent three years in jail as a suspected war criminal, was the senior bureaucrat in Manchuria from 1936 to 1939 when Japan occupied it, and is Shinzo's political hero.

Filial and grand-filial loyalties run deep in Japan. It's just one of the reasons there are concerns about Japan's jump to the right with Abe's election. He has the numbers and perhaps the experience to attempt more in his second term of government.

The politics of chopstick rattling over a few isolated rocks in the East China Sea are another complication in considering the Abe government's big stimulus gamble, highlighted this week by the Bank of Japan's announcement of open-ended money printing and moving from an inflation goal of 1 per cent to an inflation target of 2 per cent.

Along with Abe's pledge of increased fiscal stimulus – yet more infrastructure spending that inevitably comes with suspicions about more bridges to nowhere – a massive amount of money is being thrown at trying to blow Japan out of a couple of decades in the doldrums.

The column by Ambrose Evans-Pritchard this week on Japan's economic revolution rocking the world gained plenty of attention from Fairfax readers. But with the dust settling on the Bank of Japan's announcement, it's time to better consider the local impact and what was missing.

In the short term, the stimulus package is generally considered a good thing for the global economy – and for Australia – despite being an escalation of the currency wars.

In the medium term, it's a big gamble for a government that already runs on an unsustainable funding model, a level of indebtedness and spending that makes the Greeks and Americans look frugal.

Read more: http://www.smh.com.au/business/world-business/japans-jump-to-the-right-a-concern-20130125-2db6j.html
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Catweasel
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Catweasel say crikey.

"The politics of chopsticks." New paradigm term coin by paragon of mouse, Michael the Pascoe.

But mouse know a Chinese and a Japanese use a chopsticks.

So it communicate well with its audience.
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Abenomics: more religion than reality

January 28, 2013 - 11:57AM
William Pesek

Let’s get over this honeymoon for Japan’s new prime minister, Shinzo Abe, and do a reality check on his idea that the economy is about to boom now that voters have returned him to office.

At first, I wondered if I had lost my bearings. Was I just hopelessly cynical after 11 years in Tokyo, watching a numbing parade of inept leaders come and go as the Liberal Democratic Party pledged change that never arrived? The steps Abe has taken in the first few weeks of his latest premiership restored my faith in the merits of skepticism.

Abe’s big idea, the one that has investors feeling the most bullish on Japan since 2009, is fiscal pump-priming and getting the Bank of Japan to do more to stimulate growth.

About 21 per cent of respondents to a Bloomberg poll now see Japan as offering the best opportunities over the next year. The same poll showed 54 per cent are more optimistic than pessimistic about what some are calling Abenomics.

Those numbers are hard to ignore on two scores. First, I only hope that those in charge of managing my retirement accounts aren’t among the Japan-bulls-come-lately.

Abe failed miserably

The second is how short memories can be. Abe, remember, failed miserably in his first term as prime minister in 2006-07.

Abe’s LDP spent almost 20 years building bridges, roads, tunnels, dams and airports to nowhere and forcing the central bank to add liquidity to the banking system to end deflation. And what did those unimaginative policies leave Japan’s 126 million people with? The easy answer is the world’s highest ratio of debt to gross domestic product.

Read more: http://www.smh.com.au/business/world-business/abenomics-more-religion-than-reality-20130128-2dfzo.html
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