Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
When Will UK Coronavirus Crisis Imrpove - Infections and Deaths Trend Trajectory Analysis - 8th Apr 20
BBC Newsnight Focuses on Tory Leadership Whilst Boris Johnson Fights for his Life! - 8th Apr 20
The Big Short Guides us to What is Next for the Stock Market - 8th Apr 20
USD Index Sheds Light on the Upcoming Gold Move - 8th Apr 20
The Post CoronaVirus New Normal - 8th Apr 20
US Coronavirus Trend Trajectory Forecast Current State - 7th Apr 20
Boris Johnson Fighting for his Life In Intensive Care - UK Coronavirus Crisis - 7th Apr 20
Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up! - 7th Apr 20
Crude Oil's 2020 Crash: See What Helped (Some) Traders Pivot Just in Time - 7th Apr 20
Was the Fed Just Nationalized? - 7th Apr 20
Gold & Silver Mines Closed as Physical Silver Becomes “Most Undervalued Asset” - 7th Apr 20
US Coronavirus Blacktop Politics - 7th Apr 20
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

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