Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
20 Days Left to Find Buying Opportunities In Gold - 25th Mar 19
Will the Historic Imbalance in Gold Stocks to Gold Price Resolve ? - 25th Mar 19
EasySMX Wireless Games Controllers Review - 25th Mar 19
Stock Market Short-term Top - 25th Mar 19
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

QE Fails In Japan: Inflation Nonexistent, Consumer Spending Drops, More Ease Coming

Interest-Rates / Quantitative Easing Aug 01, 2015 - 08:38 AM GMT

By: John_Rubino

Interest-Rates

After nearly three decades of stagnation, Japan in 2013 went all-in, ordering its central bank, the Bank of Japan, to buy pretty much every bond on the market with newly-created yen. The BoJ's balance sheet -- a rough proxy for the amount of money it has created and dumped into the economy -- soared at a rate that dwarfs, in relation to GDP, the US Fed's QE programs.


Japan BOJ balance sheet

But it's not working:

Japan's Consumer Prices Rise Fractionally While Spending Drops

(Bloomberg) - Consumer price gains in Japan remained little more than zero in June while household spending dropped, challenging the central bank's effort to spur inflation.

Consumer prices excluding fresh food rose 0.1 percent from a year earlier, fractionally better than economists estimated. The same measure for Tokyo showed a 0.1 percent decline.

JPMorgan Chase & Co. and Barclays Plc are among economists estimating a second-quarter contraction that could sap momentum in inflation that BOJ chairman Kuroda predicts will pick up later this year.

"I can't see when the BOJ will be able reach the 2 percent inflation target at all," Yasunari Ueno, chief market economist at Mizuho Securities Co., said before today's data. "It appears to be a matter of time before the BOJ adds monetary stimulus."

Oil has tumbled more than 50 percent from last year's high, squelching early progress that the BOJ made with unprecedented monetary stimulus in reflating the economy. Consumer prices excluding food and energy increased just 0.6 percent in June from a year earlier.

Household spending, which dropped in 14 of the past 15 months, fell 2 percent in June from a year earlier. Retail sales data released earlier in the week showed a 0.8 percent drop from May while industrial production provided a bright spot, rebounding more than expected.

There isn't enough momentum in Japan's economy to drive up inflation, said Yoshiki Shinke, an economist at Dai-ichi Life Research. He sees a contraction as deep as 2.5 percent last quarter, driven by weaker exports and consumer spending.

Most economists see the BOJ failing to reach its goal in its timeframe, with 22 of 35 in a Bloomberg survey this month forecasting that the bank will eventually bolster stimulus.

Japan is bit of a special case because its population is aging faster than any other. The country's stores now sell more adult diapers than baby diapers while its seniors commit more crimes (mostly shoplifting for necessities) than its teenagers. In that kind of environment it's not clear that any amount of money creation will produce healthy growth.

But giving up isn't an option because debt continues to soar. The following chart is a slow-motion train wreck:

Japan debt to gdp

So, as the above article notes, "It appears to be a matter of time before the BOJ adds monetary stimulus."

Which means that Japan will be the first nation to test the modern limits of debt monetization. Specifically, what does a central bank do when it has bought all the bonds in its economy and the politicians demand even more? Does it become the country's largest landlord by buying up office buildings and apartment complexes? Or the largest hedge fund by vacuuming up blue chip equities or small caps or derivatives?

Whatever the specifics, at a certain point (arguably already achieved by most of today's major central banks) it damages the price signaling mechanism that defines free markets beyond repair.

By John Rubino

dollarcollapse.com

Copyright 2015 © John Rubino - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules