AEP: Japan's Abenomics 'dead in the water' after US currency warnings
Bank of Japan governor Haruhiko Kuroda is a true believer in quantitative easing but time is running out
28 APRIL 2016 • 8:01PM
[size=24]The Bank of Japan has been forced to retreat from further emergency stimulus after a blizzard of criticism at home and abroad, and warnings that extreme measures may now be doing more harm than good.
The climb-down by the world’s most radical central bank is the latest sign that the monetary experiments since Lehman crisis may have run their course. The authorities have not exhausted their ammunition but are hitting political and legal constraints.
The yen surged 3pc against the US dollar in the biggest one-day move in eight months and equities skidded across Asia after the Bank of Japan (BoJ) failed to take fresh action to stave off deepening deflation, catching markets badly off guard.
Governor Haruhiko Kuroda dashed hopes for ‘helicopter money’, warning that direct monetary financing of spending would be “illegal”.
Mr Kuroda insisted that the BoJ still has plenty of firepower and can at any time push interest rates even deeper into negative territory or boost bond purchases beyond the current $74bn a month. “If additional easing is needed, we will do so promptly,” he said.
The reality is that negative rates (NIRP) have backfired badly on every front. They have prompted bitter protests from banks and money market funds caught in a squeeze.
The yen has appreciated by 10pc since the BoJ first embarked on the policy in January, the exact opposite of what was intended. The rising yen - ‘endaka’ – is pushing Japan deeper into a deflation trap and undercutting the whole purpose of ‘Abenomics’.[/size]
Japan's public debt is in uncharted waters. The local is starting to dry up CREDIT: IMF
Core inflation has fallen to minus 0.3pc. The Nikkei index of equities in Tokyo has dropped 13pc this year, with contractionary wealth effects that make the BoJ's task even harder. “Negative rates have completely failed,” said David Bloom from HSBC.
Washington will not tolerate the use of NIRP in any case, deeming it a disguised attempt to drive down exchange rates and export problems to the rest of the world.
Jacob Lew, the US Treasury Secretary, warned Japan and the eurozone at the G20 in Shanghai in February that the Obama administration is losing patience with use of beggar-thy-neighbour tactics by countries already running a current account surplus. They are in effect shifting their excess capacity abroad. Germany in particular is coming into the US cross-hairs.
Richard Koo from Nomura said the US is now on the warpath against currency manipulators. Mr Lew’s threat effectively renders Abenomics “dead in the water”.
Japan has stolen a march on rivals by devaluing its currency
The Japanese economy is contracting again, caught in a debt-deflation vice. Growth has been negative for four of the last eight quarters. What was once a ‘Lost Decade’ is turning into a “Lost Quarter Century” with no remedy in sight.
“Their options are diminishing. I can’t see any way out of the debt-trap, and it is an acid test for the western world,” said Neil Mellor from BNY Mellon.
Public debt is rising fast on a shrinking economic base, pushing the public debt ratio to an estimated 250pc of GDP this year. “The debt will never be ‘repaid’ in the normal sense of the word,” said Lord (Adair) Turner from the Institute for New Economic Thinking.
Olivier Blanchard, the former chief economist for the International Monetary Fund, warned recently that country is nearing the end-game as the pool of domestic funding for the bond market starts to dry up and the Japanese treasury is forced to rely on much more costly capital from global investors.
Mr Blanchard said the funding crisis risks coming to a head rapidly, forcing the Bank of Japan to plug the gap by printing money in a “life or death” gamble. This will ultimately lead to an inflationary spiral, a form of debt default.
Bank of Japan will soon own 50pc of the entire stock of Japanese government bonds
Ryutaro Kono from BNP Paribas said the BoJ’s bond purchases are already soaking up the entire budget deficit, with as much to spare. “All the government has to do is to decide on more fiscal spending, and Japan will have begun a de facto helicopter drop,” he said.
Premier Shinzo Abe is already drawing up plans for a $100bn blitz of extra spending this year, and is hoping to cajole the rest of the G7 to support a joint fiscal expansion to pull the global economy out of the doldrums at a summit in May.
Mr Kono said the underlying problem is that Japan’s trend growth rate has fallen below zero as baby boomers retire and demographic crunch worsens. The slightest shock tips the economy back into recession. “This is something neither monetary easing or fiscal stimulus can rectify,” he said.
Japan's has become the world first rich country with a negative trend growth rate. Recession is now normal
A shrinking workforce means that Japan can have a tight labour market – with unemployment falling to 3.2pc in March, and the job-to-applicant ratio rising to 1.3 – even though growth is negative. Nothing like this has been seen before in the modern world.
The only way out of impasse is a blast of deep reform to raise productivity and mobilize women. This means firing the ‘third arrow’ of Abenomics. There have been successes but it has been patchy.
‘Womanomics’ has raised female participation rate from 68pc to 71pc, chiefly by building crèches for children and better nursing care for the elderly so that women can work. The electricity monopolies have been broken up. The Trans-Pacific Partnership (TTP) was agreed in October and will be a wake-up shock for the backwaters of the Japanese economy.
Womanomics in Japan is starting to gain traction CREDIT: SOCIETE GENERALE
Mr Kono said it may be a good thing if the BoJ fails to debauch the yen. Japanese companies pocketed the windfall gains from higher margins rather than investing when the exchange rate was weak, but on the other side of the ledger households suffered a serious hit to their living standards from higher import prices. The effect was asymmetric.
“Currency depreciation in the end only transferred income from working-age families to exporters, who are less inclined to spend. You cannot get results by doing this,” he said.
http://www.telegraph.co.uk/business/2016/04/28/japans-abenomics-dead-in-the-water-after-us-currency-warnings/
Bank of Japan governor Haruhiko Kuroda is a true believer in quantitative easing but time is running out
28 APRIL 2016 • 8:01PM
[size=24]The Bank of Japan has been forced to retreat from further emergency stimulus after a blizzard of criticism at home and abroad, and warnings that extreme measures may now be doing more harm than good.
The climb-down by the world’s most radical central bank is the latest sign that the monetary experiments since Lehman crisis may have run their course. The authorities have not exhausted their ammunition but are hitting political and legal constraints.
The yen surged 3pc against the US dollar in the biggest one-day move in eight months and equities skidded across Asia after the Bank of Japan (BoJ) failed to take fresh action to stave off deepening deflation, catching markets badly off guard.
Governor Haruhiko Kuroda dashed hopes for ‘helicopter money’, warning that direct monetary financing of spending would be “illegal”.
Mr Kuroda insisted that the BoJ still has plenty of firepower and can at any time push interest rates even deeper into negative territory or boost bond purchases beyond the current $74bn a month. “If additional easing is needed, we will do so promptly,” he said.
The reality is that negative rates (NIRP) have backfired badly on every front. They have prompted bitter protests from banks and money market funds caught in a squeeze.
The yen has appreciated by 10pc since the BoJ first embarked on the policy in January, the exact opposite of what was intended. The rising yen - ‘endaka’ – is pushing Japan deeper into a deflation trap and undercutting the whole purpose of ‘Abenomics’.[/size]
Japan's public debt is in uncharted waters. The local is starting to dry up CREDIT: IMF
Core inflation has fallen to minus 0.3pc. The Nikkei index of equities in Tokyo has dropped 13pc this year, with contractionary wealth effects that make the BoJ's task even harder. “Negative rates have completely failed,” said David Bloom from HSBC.
Washington will not tolerate the use of NIRP in any case, deeming it a disguised attempt to drive down exchange rates and export problems to the rest of the world.
Jacob Lew, the US Treasury Secretary, warned Japan and the eurozone at the G20 in Shanghai in February that the Obama administration is losing patience with use of beggar-thy-neighbour tactics by countries already running a current account surplus. They are in effect shifting their excess capacity abroad. Germany in particular is coming into the US cross-hairs.
Richard Koo from Nomura said the US is now on the warpath against currency manipulators. Mr Lew’s threat effectively renders Abenomics “dead in the water”.
Japan has stolen a march on rivals by devaluing its currency
The Japanese economy is contracting again, caught in a debt-deflation vice. Growth has been negative for four of the last eight quarters. What was once a ‘Lost Decade’ is turning into a “Lost Quarter Century” with no remedy in sight.
“Their options are diminishing. I can’t see any way out of the debt-trap, and it is an acid test for the western world,” said Neil Mellor from BNY Mellon.
Public debt is rising fast on a shrinking economic base, pushing the public debt ratio to an estimated 250pc of GDP this year. “The debt will never be ‘repaid’ in the normal sense of the word,” said Lord (Adair) Turner from the Institute for New Economic Thinking.
Olivier Blanchard, the former chief economist for the International Monetary Fund, warned recently that country is nearing the end-game as the pool of domestic funding for the bond market starts to dry up and the Japanese treasury is forced to rely on much more costly capital from global investors.
Mr Blanchard said the funding crisis risks coming to a head rapidly, forcing the Bank of Japan to plug the gap by printing money in a “life or death” gamble. This will ultimately lead to an inflationary spiral, a form of debt default.
Bank of Japan will soon own 50pc of the entire stock of Japanese government bonds
Ryutaro Kono from BNP Paribas said the BoJ’s bond purchases are already soaking up the entire budget deficit, with as much to spare. “All the government has to do is to decide on more fiscal spending, and Japan will have begun a de facto helicopter drop,” he said.
Premier Shinzo Abe is already drawing up plans for a $100bn blitz of extra spending this year, and is hoping to cajole the rest of the G7 to support a joint fiscal expansion to pull the global economy out of the doldrums at a summit in May.
Mr Kono said the underlying problem is that Japan’s trend growth rate has fallen below zero as baby boomers retire and demographic crunch worsens. The slightest shock tips the economy back into recession. “This is something neither monetary easing or fiscal stimulus can rectify,” he said.
Japan's has become the world first rich country with a negative trend growth rate. Recession is now normal
A shrinking workforce means that Japan can have a tight labour market – with unemployment falling to 3.2pc in March, and the job-to-applicant ratio rising to 1.3 – even though growth is negative. Nothing like this has been seen before in the modern world.
The only way out of impasse is a blast of deep reform to raise productivity and mobilize women. This means firing the ‘third arrow’ of Abenomics. There have been successes but it has been patchy.
‘Womanomics’ has raised female participation rate from 68pc to 71pc, chiefly by building crèches for children and better nursing care for the elderly so that women can work. The electricity monopolies have been broken up. The Trans-Pacific Partnership (TTP) was agreed in October and will be a wake-up shock for the backwaters of the Japanese economy.
Womanomics in Japan is starting to gain traction CREDIT: SOCIETE GENERALE
Mr Kono said it may be a good thing if the BoJ fails to debauch the yen. Japanese companies pocketed the windfall gains from higher margins rather than investing when the exchange rate was weak, but on the other side of the ledger households suffered a serious hit to their living standards from higher import prices. The effect was asymmetric.
“Currency depreciation in the end only transferred income from working-age families to exporters, who are less inclined to spend. You cannot get results by doing this,” he said.
http://www.telegraph.co.uk/business/2016/04/28/japans-abenomics-dead-in-the-water-after-us-currency-warnings/
Yesterday at 2:18 pm by Rocky
» utube MM&C 4/26/24 Iraqi Dinar - US Treasury Exchange Rates- Focus - Banking Partnerships - Rate C
Yesterday at 2:17 pm by Rocky
» Parliamentary efforts to transform Iraq into a global market for transferring Internet capacities
Yesterday at 2:07 pm by Rocky
» A parliamentary committee that enriches the political forces: Stop plundering Iraq’s wealth and work
Yesterday at 1:56 pm by Rocky
» Politician: Salem Al-Issawi is the most likely to assume the presidency of Parliament
Yesterday at 1:55 pm by Rocky
» The price of the dollar is close to 145 thousand dinars؛ how much is $100 worth of transactions؟
Yesterday at 11:57 am by wciappetta
» Al-Sudani: The world today is witnessing crises whose impact has been reflected in the global econo
Yesterday at 9:50 am by Rocky
» The Federal Court responds to an inquiry by Al-Sudani regarding the powers of the provincial council
Yesterday at 9:40 am by Rocky
» Among them are the Iraqis... a list of the most sought-after immigrants to America
Yesterday at 9:38 am by Rocky
» An expert talks about the "biggest barrier" and the positives of merging Iraqi and Arab banks
Yesterday at 9:29 am by Rocky
» The House of Representatives adjourns its session
Yesterday at 9:24 am by Rocky
» Parliamentary demands to expedite the legislation of the Eid al-Ghadir holiday law (documents)
Yesterday at 9:23 am by Rocky
» Parliament adds the paragraph “Electing the Speaker of the House of Representatives” to its agenda
Yesterday at 9:21 am by Rocky
» Alsumaria publishes the text of the law against prostitution and homosexuality
Yesterday at 9:20 am by Rocky
» A parliamentarian reveals the reason for the failure of the Speaker of Parliament to pass during tod
Yesterday at 9:19 am by Rocky
» Al-Sudani: The government has launched many strategies and initiatives that will improve the reality
Yesterday at 8:42 am by Rocky
» International Business: Iraq has made progress in supporting businesses through investment and priva
Yesterday at 8:33 am by Rocky
» Association of Banks: Iraq is witnessing great development in the transition to electronic governmen
Yesterday at 8:25 am by Rocky
» The House of Representatives votes to add an item to its agenda (election of the Speaker of the Hous
Yesterday at 8:22 am by Rocky
» Parliamentary integrity: Combating corruption requires parliamentary legislation
Yesterday at 8:15 am by Rocky
» Al-Karaawi: America is trying to restrict Iraq
Yesterday at 8:13 am by Rocky
» The State of Law coalition moves to form the local government in Diyala
Yesterday at 8:12 am by Rocky
» The Sudanese and his battle against corruption.. Where is the fault with the government or with the
Yesterday at 8:11 am by Rocky
» Prime Minister's Advisor: We will see the dollar fall on the black market soon
Yesterday at 8:09 am by Rocky
» The Sunni blocs are resolute. The presidency of the Council is ours, away from Al-Halbousi
Yesterday at 8:08 am by Rocky
» Al-Sudani discusses with a workers’ organization his government’s steps in this field
Yesterday at 7:58 am by Rocky
» Parliament holds its session in the presence of 170 deputies
Yesterday at 7:57 am by Rocky
» In the presence of Nechirvan Barzani and Al-Sudani... the State Administration Coalition holds an “i
Yesterday at 7:55 am by Rocky
» The UAE company ADNOC resorts to Iraqi oil. Find out the reasons
Yesterday at 7:53 am by Rocky
» The Iraqi Parliament votes to add an item to elect a president to its agenda
Yesterday at 7:52 am by Rocky
» The Federal Court responds to an inquiry by Al-Sudani regarding the powers of the provincial council
Yesterday at 7:51 am by Rocky
» Al-Sudani: It is necessary to attract women to work as a productive energy that cannot be disrupted
Yesterday at 7:47 am by Rocky
» Zebari regarding targeting the Kormor field: a systematic attack on the economy of Kurdistan
Yesterday at 7:46 am by Rocky
» Saudi Arabia tops, and this is Iraq's rank... a list of major suppliers of crude oil to South Korea
Yesterday at 7:45 am by Rocky
» With a value of 125 million dollars.. Iraq is at the forefront of countries importing Iranian textil
Yesterday at 7:44 am by Rocky
» More than a billion dollars in sales from the Iraqi Central Bank within a week
Yesterday at 7:43 am by Rocky
» Al-Sudani stresses the need for the expertise of the International Labor Organization to legislate a
Yesterday at 7:29 am by Rocky
» Including the return of 21 wanted persons.. The Iraq Money Recovery Fund counts its achievements in
Yesterday at 7:27 am by Rocky
» The path to development is the criterion between true patriotism and political clowning.
Yesterday at 7:25 am by Rocky
» The file of the Presidency of Parliament is on the state administration table... this evening
Yesterday at 7:22 am by Rocky
» Director General of the International Labor Organization: Many challenges in the world of work and t
Yesterday at 7:20 am by Rocky
» Al-Sudani: The world is witnessing crises that reflect negatively on the Arab and international peop
Yesterday at 7:11 am by Rocky
» Prime Minister: Our government has provided great support for the success of the activities, program
Yesterday at 7:08 am by Rocky
» Al-Asadi: Iraq places the social protection file among its priorities
Yesterday at 7:07 am by Rocky
» Al-Sudani: Iraq is one of the first countries in the region to join the International Labor Organiza
Yesterday at 7:05 am by Rocky
» In the presence of Al-Sudani and Barzani, the State Administration Coalition holds an “important” me
Yesterday at 7:03 am by Rocky
» Appreciating the presence of Al-Sudani... Director General of the Arab Labor Organization: Here from
Yesterday at 5:29 am by Rocky
» Prime Minister: Our government has provided great support for the success of the activities, program
Yesterday at 5:28 am by Rocky
» Al-Sudani: The world is witnessing crises that reflect negatively on the Arab and international peop
Yesterday at 5:24 am by Rocky
» The Parliamentary Development Institute organizes a workshop on the political role of the representa
Yesterday at 5:22 am by Rocky
» With Arab and international participation. Tomorrow will be the start of the Fourth Baghdad Internat
Yesterday at 5:21 am by Rocky
» OPEC Secretary General: The end of oil is not on the horizon
Yesterday at 5:19 am by Rocky
» Closing a number of unlicensed offices and companies south of Baghdad
Yesterday at 5:16 am by Rocky
» Repercussions of the bombing...intensive government movements to resume work in the “Kormor” field
Yesterday at 5:15 am by Rocky
» In the presence of Al-Sudani...the opening of the Arab Labor Conference in its 50th session in Baghd
Yesterday at 5:14 am by Rocky
» Al-Sudani: We are working on drawing future visions regarding the “green and digital” economic secto
Yesterday at 5:13 am by Rocky
» Barzani after the Kormor attack: We are ready to coordinate with Baghdad to put an end to these atta
Yesterday at 5:10 am by Rocky
» Al-Sudani directs the formation of an investigative committee into the circumstances of the Kormo fi
Yesterday at 5:08 am by Rocky
» Bismayah is confused about the new electronic portal.. What about the landlord and the subcontracts?
Yesterday at 5:07 am by Rocky
» Kurdistan Government: Loss of 2,500 megawatts of electricity due to targeting the Kormor field
Yesterday at 5:06 am by Rocky
» Crisis in Kurdistan: 12-hour daily power outage and complaints of “confusion”
Yesterday at 5:05 am by Rocky
» The Supreme Anti-Corruption Commission demands Nineveh for the contracts concluded by “Najm Al-Jubou
Yesterday at 5:04 am by Rocky
» Al-Khanjar, Al-Samarrai, and Abu Mazen are hosted by Shaalan Al-Karim to discuss accelerating the se
Yesterday at 5:03 am by Rocky
» Iraq asks the countries of the world to respond to its requests to extradite wanted persons: We have
Yesterday at 5:02 am by Rocky
» “It is coming soon.” The Sudanese advisor sets the date for the referral of the Baghdad metro and th
Yesterday at 5:01 am by Rocky
» Al-Mubarqa: Iraq reserves its full right to respond to the Australian behavior
Yesterday at 5:00 am by Rocky
» Dollar exchange rates on Iraqi stock exchanges... recorded a decline, and this is the list
Yesterday at 4:58 am by Rocky
» Mr. Al-Sadr supports the position of American university students
Yesterday at 4:56 am by Rocky
» Iraqis are ranked 7th in the Arab world on the list of those most seeking immigration to America. He
Yesterday at 4:55 am by Rocky
» Soon.. 3 new hospitals will open in Baghdad
Yesterday at 4:52 am by Rocky
» Sponsored by Al-Sudani...the opening of the Arab Labor Conference in its fiftieth session in Baghdad
Yesterday at 4:51 am by Rocky
» Al-Shammari chairs a meeting at the controlling headquarters to review the results of the security o
Yesterday at 4:49 am by Rocky
» Arab Labor Organization: We commend Iraq's interest in the Arab Labor Conference
Yesterday at 4:48 am by Rocky
» Al-Sudani: The development road project will provide many job opportunities
Yesterday at 4:47 am by Rocky
» Sudanese advisor criticizes Kuwaiti analyzes regarding the development road project
Fri 26 Apr 2024, 2:21 pm by Rocky
» Al-Mandalawi stresses the need to strengthen economic and trade cooperation between Iraq and Poland
Fri 26 Apr 2024, 2:04 pm by Rocky
» Power maneuvers: America provides defensive weapons to Kurdistan in exchange for withholding from Ba
Fri 26 Apr 2024, 10:26 am by Rocky
» Kuwait is drilling an oil well near Umm Qasr, towards Iraqi territory
Fri 26 Apr 2024, 10:24 am by Rocky
» In the document... the first Iraqi ministry identifies the obstacles to changing the new official wo
Fri 26 Apr 2024, 10:22 am by Rocky
» Italian Institute: Iraq is stuck in its own crises, including Baghdad’s efforts to undermine the “au
Fri 26 Apr 2024, 10:21 am by Rocky
» The head of the Integrity Commission announces the holding of an international Interpol conference i
Fri 26 Apr 2024, 10:18 am by Rocky
» Planning: Iraqi companies are not efficient in conducting the population census
Fri 26 Apr 2024, 10:14 am by Rocky
» MM&C 4/25/24 National Bank of Iraq goes live with Temenos core banking and payments
Fri 26 Apr 2024, 8:06 am by Rocky
» A banking official indicates a "danger" to Iraq by depriving more than half of its banks of dollars
Fri 26 Apr 2024, 7:55 am by Rocky
» With the participation of the Association of Private Banks, investment opportunities are on the tabl
Fri 26 Apr 2024, 7:45 am by Rocky
» Within a month... an Iranian border crossing recorded a noticeable increase in exports of goods to I
Fri 26 Apr 2024, 7:44 am by Rocky
» The Association of Private Banks appreciates the efforts of the government and the Central Bank to c
Fri 26 Apr 2024, 7:43 am by Rocky
» Al-Maliki's coalition presents a third candidate for the position of governor of Diyala
Fri 26 Apr 2024, 6:57 am by Rocky
» Arab gathering: The Kirkuk problem is getting complicated and the Sudanese must intervene
Fri 26 Apr 2024, 6:56 am by Rocky
» Next week.. a Kurdish delegation will visit Baghdad to meet with the Minister of Finance
Fri 26 Apr 2024, 6:54 am by Rocky
» Under the pretext of salaries... Al-Party refrains from handing over port revenues to Baghdad
Fri 26 Apr 2024, 6:53 am by Rocky
» Association of Banks: For the first time, we are witnessing a clear targeting of depriving half of t
Fri 26 Apr 2024, 6:51 am by Rocky
» Parliament does not know the reason for the delay in sending the 2024 budget schedules: Voting takes
Fri 26 Apr 2024, 6:49 am by Rocky
» Applicants for the 2024 Hajj are demanding that the Central Bank secure the dollar for them through
Fri 26 Apr 2024, 5:09 am by Rocky
» Governmental and private banks will showcase their services tomorrow during Financial Inclusion Week
Fri 26 Apr 2024, 5:08 am by Rocky
» Iraq's oil exports rise despite OPEC+ cuts
Fri 26 Apr 2024, 5:06 am by Rocky
» A study explodes a "surprise"... Iraq is among the countries that export oil to "Israel": How is the
Fri 26 Apr 2024, 5:04 am by Rocky
» Al-Araji emphasizes working to strengthen national identity
Fri 26 Apr 2024, 5:02 am by Rocky
» Al-Sudani visits Saudi Arabia to participate in the World Economic Forum in Riyadh
Fri 26 Apr 2024, 5:01 am by Rocky