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Bank of Japan roll the dice


Sync

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Aug 27, 2009
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28,845
Bank of Japan unveils aggressive easing - FT.com

The Bank of Japan will aim to double the monetary base over two years through the aggressive purchase of long-term bonds, in a dramatic shift.

Haruhiko Kuroda on Thursday announced his arrival as central bank governor with a “new phase of monetary easing”, a move that comes after Prime Minister Shinzo Abe told the bank to target a 2 per cent rate of inflation.

The BoJ said it would boost Japan’s monetary base from Y135tn ($1.43tn) to Y270tn by March 2015, mainly by buying more long-term government bonds. That will raise the average remaining maturity of its holdings from about three years to seven years, keeping downward pressure on yields all along the curve.
The main aim here is to increase inflation, Japan's been suffering from sustained deflation for over 2 decades. It's an effort to jump start investment/borrowing in the Stock Market and business sectors.

It also has the effect though of artificially decreasing the value of Yen (As seen by it's sudden drop this morning). It's already down 3% against the dollar. The US market will make for interesting viewing today.

The 2 consequences of this are:
1. You're running the risk of sparking a trade/currency war with the US and China who will understandably be ticked by this
2. If I'm in Japan and I can now get lots of money at a very low interest rate, I'm going to invest it OUTSIDE Japan where I can benefit from the currency drop.

It's a hell of a gamble all told, but the last 20 years have failed miserably so the feeling appears to be that the risk is worth it.
 

Ribeye

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If only there was a regional war that they could get involved in,

Wait, WHAT?
 
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Dylan2010

just when Japanese retirees would like to start spending their savings. Its a deposit theft by stealth
 

opinions

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just when Japanese retirees would like to start spending their savings. Its a deposit theft by stealth
Shure is. Low interest rates and high inflation just wipes out savers spending power. If you are a Jap get spending soon while your money is still worth something, why this policy was announced? Nothing better to stimulate economy than this 'Use it or Lose it' scam.

Its just another example of bankers screwing the suckers who have saved all their life. Savers in Cypress got a much better deal!
 
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Dylan2010

Shure is. Low interest rates and high inflation just wipes out savers spending power. If you are a Jap get spending soon while your money is still worth something, why this policy was announced? Nothing better to stimulate economy than this 'Use it or Lose it' scam.

Its just another example of bankers screwing the suckers who have saved all their life. Savers in Cypress got a much better deal!
it will also backfire, if they start hollowing out their savings, interest rates will rise anyway. The Japanese central bank is not bigger than the market, they can only push against "open doors".
 

Sync

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Aug 27, 2009
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Shure is. Low interest rates and high inflation just wipes out savers spending power. If you are a Jap get spending soon while your money is still worth something, why this policy was announced? Nothing better to stimulate economy than this 'Use it or Lose it' scam.

Its just another example of bankers screwing the suckers who have saved all their life. Savers in Cypress got a much better deal!
This really isn't the bankers for once. It's the govt man's decision. The use it or lose it idea isn't terrible tbh, but the way they've done it will just incentivise flight of capital unless they add on barriers on external investment or added tax breaks/enticements for domestic investment i.e become more protectionist.
 
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Dylan2010

I havnt followed the Japan story in a while but essentially the gov was able to borrow cheap because the people were such prolific savers (and translated by the numptys on RTE as they are borrowing from themselves so there is no problem) , now demographics will take over and the same peeople will start running down their savings. The Debt to GDP is over 200% and if the gov need to borrow from abroad they will not be able to borrow for long at 1%. Imagine what every 1% rise in interest rates will do to state finances when debt to GDP is over 200%
 

Spanner Island

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just when Japanese retirees would like to start spending their savings. Its a deposit theft by stealth
It was always going to happen...

There aren't enough young people in Japan to support the retirees...

And Japan ain't the only place that's the case...

Europe is heading there fast too...

I think the current retirement generation are going to have to accept they're going to have to contribute at some stage to fixing the mess we're all in...

Public opinion will swing away from keeping pensioners immune soon enough... and particularly in relation to the Ahern generation who expect the rest of us to keep them in the lifestyles to which they've become accustomed and obviously think they're entitled...

There's gonna be far less tolerance of the 'We've worked hard and paid our taxes and deserve to be left alone' pensioner whinge in the years to come... and particularly when the generation that wrecked this country become the pensioner generation...
 
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Dylan2010

It was always going to happen...

There aren't enough young people in Japan to support the retirees...

And Japan ain't the only place that's the case...

Europe is heading there fast too...

I think the current retirement generation are going to have to accept they're going to have to contribute at some stage to fixing the mess we're all in...

Public opinion will swing away from keeping pensioners immune soon enough... and particularly in relation to the Ahern generation who expect the rest of us to keep them in the lifestyles to which they've become accustomed and obviously think they're entitled...

There's gonna be far less tolerance of the 'We've worked hard and paid our taxes and deserve to be left alone' pensioner whinge in the years to come...
sure, riding the system ponzi style cant go on forever but young people might be saving to so will get caught up in it. the govs are essentially telegraphing that people ought to buy gold and bury it in their back yards. Why do you think so many Roman coins have been found over the years? a breakdown of faith in the system perhaps?
 

jcdf

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3,778
We shall see where this leads.
 

jcdf

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just when Japanese retirees would like to start spending their savings. Its a deposit theft by stealth
Not really. They said openly that they are going to do this. Some lesser educated individuals might not realize the consequences of these actions for themselves but that is a different matter. Nothing is impervious to change in value, not even gold, everything goes up and down such as the value of money.

it will also backfire, if they start hollowing out their savings, interest rates will rise anyway. The Japanese central bank is not bigger than the market, they can only push against "open doors".
They cannot afford to do nothing. If you do not have a better suggestion then you should not be criticizing them.

This really isn't the bankers for once. It's the govt man's decision. The use it or lose it idea isn't terrible tbh, but the way they've done it will just incentivise flight of capital unless they add on barriers on external investment or added tax breaks/enticements for domestic investment i.e become more protectionist.
That seems to be the way forwards for most of the world.

It was always going to happen...

There aren't enough young people in Japan to support the retirees...

And Japan ain't the only place that's the case...

Europe is heading there fast too...

I think the current retirement generation are going to have to accept they're going to have to contribute at some stage to fixing the mess we're all in...

Public opinion will swing away from keeping pensioners immune soon enough... and particularly in relation to the Ahern generation who expect the rest of us to keep them in the lifestyles to which they've become accustomed and obviously think they're entitled...

There's gonna be far less tolerance of the 'We've worked hard and paid our taxes and deserve to be left alone' pensioner whinge in the years to come... and particularly when the generation that wrecked this country become the pensioner generation...
You are contradicting yourself. The pensioners are part of the Public opinion and according to the demographics an increasingly large and important part of it. Asking them to penalize themselves will be a difficult thing to do. Though perhaps more so in the West than in Japan.

sure, riding the system ponzi style cant go on forever but young people might be saving to so will get caught up in it. the govs are essentially telegraphing that people ought to buy gold and bury it in their back yards. Why do you think so many Roman coins have been found over the years? a breakdown of faith in the system perhaps?
The Romans never used fiat currency. People have always tried to evade tax. Nowadays they principally use off shore accounts. I heard somewhere that the combined value of all the worlds offshore accounts is expected to be equal to the combined size of the US and Japanese economy. Huge in other words. The price of gold will probably continue to rise for much of the foreseeable future before it comes crashing down.
 

Ren84

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Jan 14, 2011
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50,016
QE on steroids and coke by the sounds of it. Somewhere right now a Japanese version of Ribeye is undergoing spontaneous combustion. :p
 
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Dylan2010

Not really. They said openly that they are going to do this. Some lesser educated individuals might not realize the consequences of these actions for themselves but that is a different matter. Nothing is impervious to change in value, not even gold, everything goes up and down such as the value of money.
you make sound so morally neutral, its still a deliberate devaluation of the currency which generally works against the interest of low and middle income people, wealthy people tend to benefit.

They cannot afford to do nothing. If you do not have a better suggestion then you should not be criticizing them.
the state could live within its means, they have a debt to GDP ratio above 200%

The Romans never used fiat currency. People have always tried to evade tax. Nowadays they principally use off shore accounts. I heard somewhere that the combined value of all the worlds offshore accounts is expected to be equal to the combined size of the US and Japanese economy. Huge in other words. The price of gold will probably continue to rise for much of the foreseeable future before it comes crashing down.
they went down the inflation route, at the early stage of the empire, the currency was worth the metal in the coins, generally silver, by the end the denominations got bigger and the silver content of the coins went to 0. Why , because the Roman empire got afflicted with the costs of an unaffordable welfare state.
 
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