Japan Loses Pretense — Abe Demands Currency Manipulation


I guess this is good.  At least, in terms of honesty.  I’d rather someone be upfront about it instead of the serial dishonesty about it that comes from China and the rest of the lunatics. 

Of course, I don’t understand the continuation of the insanity.  How many times to you have to go to the well and bring up an empty bucket before you understand the well is dry?

Back towards the end of September, I wrote about Japan doubling down on stupid on the race to the bottom with more QE.  An election in Japan was held since then.  Amazingly, the challenger won, in part, by running on the platform that Japan isn’t printing fast enough!  Japan’s next premiere, Shinzo Abe, is demanding higher inflation.  Yes, that’s right, he’s demanding the loss of buying power for his people.  And, they elected him.  More than that, he’s overtly discussing currency manipulation, and asserting control over the Bank of Japan. 

Abe said he will pick someone who agrees with his views on the need for bolder monetary easing to succeed BOJ Governor Masaaki Shirakawa when his term expires in April next year.

“At this month’s policy meeting, the BOJ said it would examine (setting an inflation target) at its next meeting” in January, Abe said on television on Sunday.

If it doesn’t, we’ll revise the BOJ Law and set up a policy accord with the central bank to agree on an inflation target. We may also seek to have the BOJ held accountable for job growth.”

He wants the BOJ to share with the government a binding 2 percent inflation target, double the central bank’s current goal, and ease policy “unlimitedly” to achieve it. There is no specific time frame.

Some central bank policymakers, notably the conservative Shirakawa, have been reluctant to set a 2 percent inflation target in a country which has been mired in grinding deflation for more than a decade.  But they may have little choice but to meet Abe’s demand given explicit threats to the BOJ’s independence.

“Countries around the world are printing more money to boost their export competitiveness. Japan must do so too” to keep the yen from rising, Abe said. “It makes a big difference whether the yen is at 80 to the dollar, or at 90 to the dollar.”

I do enjoy the candor.  There are a couple of problems with this muddled thinking.  First of all, inflation doesn’t create a good economy.  Often, inflation is a sign of a growing economy, but inflation, in and of itself, doesn’t do anything but decrease the value of the currency.  Just because you have inflation doesn’t mean you’re doing anything right.  In fact, it’s an indication that you’re doing something wrong!!!  2%?  What’s that going to do?  If one wants to see how well that works out, just look to the UK.  There, they’ve got 2.7% inflation and negative economic growth.  Abe seems to wish to replicate this…… success? 

Another problem with this insanity is that Abe is pretending Japan hasn’t really participated in the QE of the world.  Good heavens!  They just got through with QE9 and now they’re going to have QE10!  It’s no small feat, but in relation to the size of the economy, Japan is printing faster than the US! 

Metals, physical assets, and durable goods continue to look good.  Be careful on the asset purchases in that inflation does relate to property taxes. 

Right about at the 1:40 mark is what will happen when the music stops. 


And, it will be repeated until there are no chairs left. 

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11 Responses to Japan Loses Pretense — Abe Demands Currency Manipulation

  1. DirkH says:

    Some of Japan’s biggest industrial conglomerates teeter on the verge of bankrupcy. Sharp, Sony, Panasonic, all near 5 year lows… don’t know the names of the weirder ones… They’re a bit desperate.

    When everyone around you prints money and your own currency rises and rises, your workers become more expensive all the time. An export oriented country can ill afford that. So they gotta enter the rest of the bunch.

    I hear that they have over time re-oriented their economy more towards own consumption instead of relying on exports. But in fact that is only a different way of saying that their trade balance broke down in 2008 and hasn’t recovered, and hovers in slightly negative territory.

    I think they want to weaken the Yen (and make their products cheaper this way) to regain their export prowess.

    • suyts says:

      Yeh, Japan’s options are limited. They are pretty much forced to do so, but, this isn’t going to end well for them.

      • DirkH says:

        It might reduce the personal wealth of the population, I agree on that, and their policies have been too sluggish for 20 years now. They basically invented Too Big Too Fail.

        I also think it will do little to re-establish their export business. Remember the 80ies? Sony was everywhere, the equivalent of Apple today (or rather Apple in SEPT 2012).

        They haven’t come up with new ideas and new companies for far too long. Maybe complacency.

      • suyts says:

        I think complacency had a lot to do with it. They didn’t see China coming.

        • cdquarles says:

          I disagree, James. They saw both China and Korea coming. They helped them to help themselves. All that did was kick the can down the road.

        • suyts says:

          Well, it could be that they’re as stupid as American politicians, saw them coming but did nothing to prevent the economic hurt which was sure to come. But, I don’t think they understood all that would occur with an export competing China….. but, I could be wrong.

  2. Pingback: Oops! Spoke Too Soon On Japan’s Honesty! | suyts space

  3. Pingback: Businesses Highlight Abe’s Error — Reuters Blame Messenger! | suyts space

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