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Japan's regional banks to bear brunt of BOJ bombshell

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In other words we will lose many of the "zombie" banks, and end up with a few large "too big to fail" banks, who will have that much more control over the national economy.

Wonderful

0 ( +2 / -2 )

Corporate demand for borrowing has been weakened by slow economic growth at home and abroad, meaning firms are reluctant to invest in either plant machinery or raise wages.

The central bank should shut down and issue a policy statement instructing the government what to do, instead of the other way around.

Interest rates were already at zero; making them negative for financial institutions depositing at the BOJ does not suddenly make corporate demand for borrowing increase.

That is despite sustained pressure on them from Prime Minister Shinzo Abe and BOJ Governor Haruhiko Kuroda to spend more on equipment and wages.

So Abe should be thinking about what he is not doing right, and fix it. Or alternatively resign and let someone else's ideas get a run. And Kuroda should accept that monetary policy can't fix every ail in the economy.

1 ( +1 / -0 )

Just another of the many signs of the abject failure of Abe-moron-omics. Let's see, NIRP failed to produce the expected results in EUROZONE, Sweden, Switzerland, and Denmark (which has since abandoned NIRP), but the buffoon Kuroda expects a different result in Japan? He should just go ahead and let his one above ground foot join the other six-feet under.

2 ( +3 / -1 )

There's this disturbing bit from Goldman's take of the BOJ's decision:

Regarding the Introduction of Supplementary Measures for Quantitative and Qualitative Monetary Easing announced at the December 2015 MPM, we believe the BOJ thinks that JGB purchases will have reached their technical limit in quantitative terms eventually, and it is highly likely it was a last-ditch measure to somehow maintain the current pace of purchases for some time. If not, we would have expected the BOJ not to introduce a negative interest rate this time either and to have opted instead to further increase JGB purchases.

And when none other than Goldman Sachs says the Bank of Japan engaged in a "last-ditch measure" it may be time to panic.

http://www.zerohedge.com/news/2016-01-29/disturbing-reasons-why-bank-japan-stunned-everyone-negative-rates

1 ( +2 / -1 )

Negative interest rates? Does that mean they'll pay me to borrow their money?

2 ( +2 / -0 )

"it may be time to panic."

Why? What specific risks do you have in mind?

1 ( +2 / -1 )

BOJ watcher Izuru Kato said on a weekend TV show that perhaps the real aim of introducing NIRP was to divert the market's attention away from the BOJ's (yet again) shifting back their timeline for hitting their 2% inflation.

On the other hand, Goldman has it right. The BOJ can't keep buying up all the debt to expand the money supply forever. So the BOJ professors may have decided to set up NIRP before they totally hit the wall.

But in the first place, the easy money policy hasn't produced the results that were purportedly intended.

And the quantitative policy contradicts the NIRP. Financial institutions are supposed to sell their JGBs to the BOJ under QQE, but under NIRP if they sell their JGBs and put the money in the bank (BOJ) they will be charged a penalty for doing so. If that's the case, why would they sell their JGBs to the BOJ? The crappy yield on a JGB is still slightly better than paying the negative interest rate penalty.

What the BOJ wants is for they money to be lent out. But it should be obvious to these wizards by now that cheap money is not much good if no one wants it, and no one wants it because of the dearth of growth opportunities offered in Japan.

It is the government who can do something for a more attractive business environment, not even more BOJ easy money.

Fingers crossed that all this backwards policy making doesn't have deleterious consequences on the economy further down the track.

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Global stock markets since the new year have lost over $7.5 trillion in worth. The most ever in recorded history. The largest public pension fund in the world, run by the BOJ, was starting to panic after it had started investing billions into the Nikkei 225 since JGB's were paying a ridiculous amount of around .003% on the 10 year. So when the bubble, fueled by ever lower interest rates, increasing money supply, and devalueing your currency, started to pop, they again, like they've been doing over 20 years, decided to do about the only thing, central banks can do : devalue the currency / print more money. You would of thought, people would catch on by now. There is over $200 trillion in worldwide government debt, which can never be paid back. The only thing the central banks, particularly the BOJ, Federal Reserve, and the ECB, can do, is hope they can print enough money and kick the can down the road a few more years.

The most important component of a well run economy, where mal investment is kept to a minimum is the interest rate. That is, an interest rate set by the market. Not an artificial peg, manipulated by a central bank, controlling the rate through bond purchases, government debt, and robbing savers blind. See, the "shale oil bust "in the United States where 0% interest rates for over 84 straight months led to over investment, over speculation, and will lead to massive bond defaults because these companies produce the oil at over $70 a barrel. But who thought it would fall under $100 when the bubble vision media proclaims that Obama and the central banks can now take a victory lap: Sorry, the easy part was printing money. Now try and sell those $3.5 trillion of Treasury Bonds and over $1 trillion in mortgage backed securities.

-1 ( +0 / -1 )

Negative interest rates? Does that mean they'll pay me to borrow their money?

Yes, they'll charge the banks for depositing the money but pay them for lending the money.

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How much longer will it be before banks charge us for keeping our money in the bank? How else will they make money?

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How much longer will it be before banks charge us for keeping our money in the bank? How else will they make money?

Speculation has is that banks will try to make up for the lower revenues by buying more foreign bonds, Japanese equities and J-REITs instead. Those assets have gone up. (But financial institution stock prices have slumped, so not sure the speculation is going to play out...)

If any bank starts charging depositors for holding their money any time soon, they will promptly lose those customers to competitors (including the famed tansu-yokin).

It may be through increased ATM charges etc that they try to make more money per customer.

0 ( +0 / -0 )

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