Skip to comments.Japan Threatens Takeover of BoJ
Posted on 12/24/2012 5:59:49 PM PST by Kaslin
A very serious question that investors face today regards whether Japan is or isn't serious about politicians taking over Japan's central bank.
Personally, I think the politicians are serious, as well as "seriously wrong".
If you think that I am wrong, please consider Yen Declines After Abe Says He May Change BOJ Law.
The yen declined versus its peers after incoming Japanese prime minister Shinzo Abe said he will consider changing the law on the central bank unless it boosts its inflation target to 2 percent next month.
Abe said on Japans Fuji Television yesterday that he will consider revising the law governing the Bank of Japan if it fails to increase its inflation target from 1 percent at its January meeting. He is poised to become prime minister after his Liberal Democratic Partys coalition secured a majority in elections on Dec. 16.
Abe has called on the BOJ to pursue unlimited easing to help end deflation and revive growth. BOJ Governor Masaaki Shirakawa and his board last week refrained from doubling the central banks 1 percent inflation target, while expanding its asset-purchase program by 10 trillion yen ($118 billion) to 76 trillion yen.
Bear in mind that nothing moves in a straight line. The Yen has declined significantly, and a snapback rally may (or may not), happen at any time. Longer term, I see no reason to change my forecast of a declining Yen.
Bloomberg reports BOJ Holdings of JGBs Exceed 100 Trillion Yen for First Time
The Bank of Japan holdings of the governments bonds exceeded 100 trillion yen ($1.2 trillion) for the first time, raising the risk that yields will jump on perceptions that it is financing public spending.
The central bank held 104.9 trillion yen of the debt at the end of September, 11.1 percent of all government bonds, a quarterly central bank report showed today in Tokyo. The BOJ said it was the highest on record. Bond holdings by foreign investors rose to a record 9.1 percent.
The BOJ yesterday expanded its asset purchase program for the fifth time this year, with half of the 10 trillion-yen increase to be spent on JGBs. Incoming Prime Minister Shinzo Abe wants more central-bank action to defeat deflation and has pledged fiscal stimulus to stoke growth, even as hes constrained by the worlds largest public debt. If QE worked and fiscal stimulus worked, Japan would not have debt-to-GDP ratio of 230%. Japan's national debt now exceeds a quadrillion yen!
A quadrillion is a number with 15 zeros. 1,000,000,000,000,000. Can that ever be paid back? How?
US has been running budget deficits exceeding $1 trillion for four straight years. What the heck is that other than Keynesian stimulus?
It has failed. But economists like Paul Krugman want more of it (please see Mish on Capital Account: "Time for Krugman to Leave Ivory Tower for Real World").
Krugman will claim deficit spending prevented disaster. It did no such thing. All it did is pile up the debt that cannot possibly be paid back.
The average 7th grader likely understands that he cannot spend more money than he has for years on end. The average economist does not.
For more on Japan, please consider Kyle Bass on the End of the Debt Supercycle and a Coming Massive Devaluation of the Yen; Most Difficult Time to Invest; The Belief Bubble
While Obama is sitting on a Hawai'i beach chuckling to himself, "Yeah, man. If Japan can, why can't we?"
From reading the title for a second I thought it was a thread about Bob J.
Central banking = organized crime (legal too).