BOJ in bind as oil slump makes for slippery price goal

This is one big scam. Inflation is not about economic growth. The only reason the government wants inflation is because of debt management. The reason for all this debt is the government wants to borrow and spend without raising taxes. If it always raised taxes to increase spending, then there would be a direct feedback and we'd know the cost. Instead it sells bonds (which in essence raises the money supply) and this lowers the value of the money on world markets as well as has a knock on effect of increasing consumer prices, which makes us relatively poorer. So in the end, there is still a cost, as there would have been if taxes were raised. Just it's a more underhanded method to increase the size of government.

Now, if all of this government spending was for improving the quality of citizens lives it would be one thing, but we know that governments have been captured by the corporate and investing class, so spending policy is highly skewed to favour the economic elite. The proof of this is rising income and wealth gaps. In Japan, over 10% of national income goes to the 1%. In 1980, it was around 7%. The wealth gap is even greater. What's worse, now the BOJ is selling bonds and buying stock and property funds to pump up inflation. They are creating a stock market bubble that is further enriching the elite and this asset investment is having little or no effect on salaries, so workers are hurting even more as prices rise and savings lose value.

If it wasn't for human induced climate change, we should welcome a drop in oil prices, especially in the case of Japan, which imports huge amounts of energy. For the average person, if price savings are passed along (don't expect TEPCO to do this for heating bills) this would broadly free up money, which could help spur demand and economic growth. Yet because of this odd fixation on inflation figures, decreasing oil prices are are viewed by the BOJ negatively.

One has to sarcastically laugh at the hubris exhibited by the politicos here. The future is not a human project to be engineered to one's liking but rather a tidal maelstrom to be expertly navigated- Abe Canute has shown himself to be up**** creek without a paddle on numerous occasions....

The plunge in oil prices was never in their plan. So now, it's time to revise the plan, not stick with it.

One of the BOJ board members said in parliament that he'd resign if they didn't meet the 2 year target, so confident he was in his snake-oil.

The monetary shamanism just doesn't work as advertised, that's the reality. The reflationists have got it wrong.

warispeace,

A largely agreeable first paragraph.

Instead it sells bonds (which in essence raises the money supply)

In reality, this is what is happening since the Government issues debt, the primary dealers (reluctantly, judging by yesterday's auction results) buy it, then they immediately sell it on to the BOJ for their stimulus experiment. But it's not until the BOJ buys it that the monetary base is increased.

now the BOJ is selling bonds

Buying.

Warispeace, you said it better than I ever could; agreed on all points. I had never seen those figures on how much of Japan's national income goes to the top 1%; thanks for them.

I shudder to imagine what will happen when the next oil price spike comes -- and it is coming, some day. You would think that Abe, Kuroda, and the BOJ would welcome the unexpected windfall that is today's low oil prices; they mask some f the worst effects of their currency devaluation, though of course Japanese consumers are not getting anywhere near the full effect that these low prices should be bringing us. This should be the impetus for a genuine economic boom: lower energy prices means lower costs all the way around, and should mean lower prices and higher demand. But Abe and Kuroda's wrongheaded determination to have higher computer prices no matter what might mean even more money printing -- which will make the uncontrollable inflation that comes when oil once again hits $100 that much worse.

".....then they immediately sell it on to the BOJ for their stimulus experiment."

15 years is a long time for an "experiment."

@fxgai

Thanks for pointing out my miss. The BOJ can both sell and buy, but now they are buying heavily, in part to make up for the reduction of government bond holdings in the GPIF portfolio.

Warispeace, yes, that about sums it up. Only... the real problem is, that happens to be the total wisdom of what goes by the description of "economist" nowadays. As long as some statistics grow, why bother with the economy itself growing. Any people that elects governments like this and accepts politics like that, deserve to have to pay the coming bills.

Slowly, slowly the currency depreciation race downwards is picking up speed. I am looking forward to the wake-up day. (I wish swiss francs were not so expensive in Japan. But the decision of the Swiss government made up for the expenses)

15 years is a long time for an "experiment."

1) If you want to complain about the characterization, complain to Leika Kihara / reuters about it. 2) Kuroda's current stimulus experiment comes 15 years after his predecessors first tried this failed policy in a far more moderate fashion, his current 2 year experiment on unprecedented scale is distinct.