Kuroda says BOJ will ease policy again if necessary to hit 2% inflation goal

I'm liquidating some assets and was looking for a reason to invest here but I am not able to! Japan's economic direction points negatively down and I have long given up on Abe's and Kuroda's rhetoric.....

“We always examine risk factors for the economy and prices and will take additional easing steps if necessary to achieve the price stability goal. I’ll explain that together with Japan’s economy, prices and monetary policy at this meeting.”

You will need to "explain" that, because it takes a George Orwell to call a 2% rise in consumer prices every year "stability".

Why again and again calling for 2% inflation, why not targeting 2% wage hikes ?

Why again and again calling for 2% inflation, why not targeting 2% wage hikes ? why would any company agree to a wage hike when the cost of living/ inflation is near zero. having inflation at a healthy 1~2% would force companies to raise wages. if you force companies to raise wages theyll just take it from someplace else like reduced services/quality and smaller items for the same price.

like pushing on a rope...

why would any company agree to a wage hike when the cost of living/ inflation is near zero.

Wage hikes should occur when employees become more productive. Produce 100 widgets per week this year and 101 wiedgets next year, and your wage should rise by 1% because you produced 1% more.

having inflation at a healthy 1~2% would force companies to raise wages.

There is nothing "healthy" about destroying the people's savings at a rate of 1-2% per year. Such inflation would result in wage increases, but they would only lag the price increases that negate the value of the raises, so the workers would still be worse off.

The ideal is that increased productivity leads to increases in wages, but no increase in prices. Everyone (except for the debt-ridden government looking to devalue what it owes to its creditors) comes out ahead.

wtfjapan, thanks for the explaination. And what about 2% bank interst rate ?

wtfjapan why would any company agree to a wage hike when the cost of living/ inflation is near zero. having inflation at a healthy 1~2% would force companies to raise wages.

It looks like you don't live in Japan because if you did you understand that since Abe came to power the price of almost anything you can think of has increased considerably while salaries have remained stagnant or fallen. The tax reduction Abe gave companies didn't not translate to wage increase. Companies are taking more from consumers leaving them with less to spend and to counter the price increase, consumers are tightening their purse string and spending little. Most economist or policy makers are out of touch with reality.

@drlucifer

I disagree with you. The only prices I have seen increase are beers in Izakaya. All other prices have gone down. Of course food is volatile and seasonal. But prices have dropped. Look at vending machines. In Kanagawa here, most are ¥80 to ¥100 on average.

wtfjapan, thanks for the explaination. And what about 2% bank interst rate ?

The bank rates are based much upon the rates set by the central banks, and as we all know, central banks are essentially charging zero percent interest. This is purportedly done to make it easier to borrow money, and to increase borrowing and economic activity, but mainly it is to reduce government debt servicing costs. Since rates are zero or negative, and don't necessarily reflect the risk of the country issuing the debt, there are fewer buyers, and the governments which issue the debts are often the largest buyers thereof, Japan being the greatest example.

Banks will not pay 2% interest rates because they are not trying to attract depositors, they already have plenty of money on deposit, about 1350 trillion yen at the moment. They cannot loan it out at a higher interest rate because there is no demand at the current lower rates. There is no demand even at lower rates because there are very few investments in Japan capable of creating a positive return. Positive returns in Japan are unlikely for many reasons. First, Japan's demographics mean that fundamental growth via increasing population is not possible. Next, increasing exports is almost almost impossible because competition around Asia is very strong, and the cost of manufacturing in Japan makes the country uncompetitive.

It looks like you don't live in Japan because if you did you understand that since Abe came to power the price of almost anything you can think of has increased considerably while salaries have remained stagnant or fallen.

This is not true. You have to consider the effect of the consumption tax increase, which effectively raised the cost of living by 3%. This means that the people effectively lost 3% of their incomes, which they compensated for by reducing their consumption. Many of the retailers in the area where I live raised their prices by 3% when the tax was passed, but have since lowered their prices to the pre-tax level to try to compensate for falling sales. This means that their profits have fallen by more than the 3% added to the cost of their goods.

And you have to account for Japan's energy consumption. As one of the largest consumers of electricity in the world, and with almost no nuclear power now, Japan is consuming vast amounts of oil, gas, and coal, and a decrease in the price of these has the most deflationary effect on the economy.

The tax reduction Abe gave companies didn't not translate to wage increase. Companies are taking more from consumers leaving them with less to spend and to counter the price increase, consumers are tightening their purse string and spending little. Most economist or policy makers are out of touch with reality.

The rate was only reduced a few months ago by less than one percent. This can hardly translate into higher wages, especially since 70% of Japanese companies are "loss producing", and earn not profit to tax. And now that we are into 2016, and there have been no structural reforms to offset the loss in business revenue from the consumption tax increase, companies are already starting to report more losses. If this continues, more companies will end up paying no tax at all, because they are losing more in costs than they are earning in sales.

The only one who is doing the taking is the government, and they are taking from both companies and consumers alike. Think for a moment how much of your income is absorbed in tax. Income tax, residency tax, consumption tax, phone, electricity, and gas tax, the road tolls, vehicle inspection fees, road tax, and fuel tax (even if you don't own a car, these apply to the trucks which deliver the goods you consume, and add to their cost), the port and airport taxes, then add the tariffs which apply to two-thirds of the food you eat, and to many of the goods you by. Most of the money you earn is absorbed in tax, not by the profit of companies. And profitable companies pay more in tax than they do on payroll.

MsDelicious, I don't know what tiny corner of Kanagawa you are in, but everywhere I've seen(Yokohama to Machida to Odawara and points in between, the base price is mostly ¥130.

Kuroda is full of, well, you know the rest.

MsDelicious I disagree with you. The only prices I have seen increase are beers in Izakaya. All other prices have gone down. Of course food is volatile and seasonal. But prices have dropped. Look at vending machines. In Kanagawa here, most are ¥80 to ¥100 on average.

I guess you don't even enter the supermarkets seeing as you are using vending machines and beer at izakayas as your yardstick. Before you could get a decent apple for 98yen now the same apple cost 158yen. Even the price of salt is up, Are you even aware even toll is up ?