Another year, another miss: Following a two-day meeting, the Bank of Japan pushed back its inflation target once again. The new target is 2018.
Yet, despite the missed inflation target and despite no further stimulus by the Bank of Japan at the last two meetings, the Yen has weakened.
Bank of Japan Pushes Back Inflation Target Again
Please consider Bank of Japan Trims Inflation Forecasts.
At the end of a two-day meeting, the first since a broad policy revamp in September, the central bank’s board voted to keep its new anchor for 10-year government bond yields at zero, according to a statement. The BOJ also left its target for a short-term interest rate on some commercial bank deposits at minus 0.1%.
Instead, the bank pushed back its forecast date for hitting 2% inflation to around fiscal 2018. Previously the bank said it would reach its target in fiscal 2017. The Japanese fiscal year ends in March.
The decision to stand pat on policy comes despite the government’s headline inflation measure showing consumer prices have fallen in each month since March. Even the BOJ’s own inflation gauge, which excludes both fresh food and energy, edged up only 0.2% in September, the slowest increase in three years.
The bank’s sidestepping of action demonstrates a change in Mr. Kuroda’s “bazooka” approach. Having failed to deliver 2% inflation in two years—as he boldly promised in April 2013—Mr. Kuroda has now shifted to a slower, more pragmatic approach that partly reflects the inability of central banks across the world to spark price growth as easily as they once thought. Economists say the ball is now in the court of Prime Minister Shinzo Abe’s administration.
BOJ Inflation Target History
2013, 2014, 2015, 2016, 2017, 2018
US Dollar – Japanese Yen Weekly
US Dollar – Japanese Yen Monthly
On September 5, the Bank of Japan announced “No Limit to Monetary Easing”, but has now failed to deliver increased stimulus twice.
One might have expected the Yen to rally given the newfound patience of the Bank of Japan following six years of missed targets. Instead, the Yen shows reluctance to strengthen beyond the 100 level.
Is Shinzo Abe prepared to try something spectacular?
Just Do It
I repeat my message to Abe and the Bank of Japan: Please stop talking and do something: Buy it all. Buy everything. Announce a plan to buy every asset in the world.
Alternatively, Kuroda might with to try Mish’s Sure Fire Proposal to End Japanese Deflation: Negative Sales Taxes, 1% Monthly Tax on Gov’t Bonds.
Mike “Mish” Shedlock
The Japanese economy is so inherently productive, and the Japanese people are so much heavy savers that they can run literally insane monetary policy and still get away with it.
The United States won’t be so lucky as there is horrible productivity, and Americans aren’t so much savers. That is why inflation is rising despite the very strong USD$.
I don’t see the horrible productivity I keep hearing about. Could it be horrible reporting and measuring of already existing productivity instead?
Rampant abundance in everything, resulting from over productivity is keeping deflationary effects on pricing in place for extended periods of time. Thus the inclination of consumers to spend up everything they have and defer from saving at all. Then, they pull forward tomorrow’s production by borrowing in order to consume even more today.
This is what’s happening. At least in discretionary spending. Let’s just say proper discretion is lacking in discretionary spending. It will remain absent until rates normalize enough to reduce foolish borrowing.
If underlying productivity growth was strong, you’d see growth in excess of debt increases. Japan likely experienced that for quite a while post bubble. Now things are starting to get lopsided even there, as the population ages and Kuroda goes full Krugman by refusing to recognize there is significant variations within headline “economic” metrics like GDP (As in, increased sales derived from withdrawal of a share of home price “appreciation” due to below market interest rates and QE, says literally nothing about an economy’s underlying strength, while increased sales due to more efficient production hence affordability does….)
America likely hasn’t seen growth above debt increases since at least Volker’s reign at the Fed, if then. Pretending that “services” are making up for manufacturing loss, when those services are net zero or negative make-work that wouldn’t even begin to be undertaken absent reckless credit expansion and increasingly strangling regulation, is nothing more than pure folly. A misguided understanding (more like misunderstanding) of what economics is, leading to misguided metrics for “managing” “it”, leading to wave after wave of the blind leading the blind (with the few none blind being forced along at gunpoint).
Like proclaiming a patient healthier and healthier for every drop of “infected” blood being drained during a bloodletting procedure. If he’s still not well; well, that’s because he still has more blood left that needs letting…. So, let’s double down and make another cut. Then another. Since “everybody knows” that if we hadn’t started letting blood, “the system” would have collapsed and all…..
employee compensation outstripping output (for now)
…
Nonfarm business sector labor productivity decreased at a 0.6-percent annual
rate during the second quarter of 2016, the U.S. Bureau of Labor Statistics
reported today, as output increased 1.1 percent and hours worked increased 1.7
percent. (All quarterly percent changes in this release are seasonally
adjusted annual rates.) From the second quarter of 2015 to the second quarter
of 2016, productivity decreased 0.4 percent, the first four-quarter decline in
the series since a 0.6-percent decline in the second quarter of 2013. (See
table A.)
Labor productivity, or output per hour, is calculated by dividing an index of
real output by an index of hours worked of all persons, including employees,
proprietors, and unpaid family workers.
http://www.bls.gov/news.release/prod2.htm
If productivity were so good in the US, there would be no trade deficit.
I suspect that a different effect is theblack market caused by the underground economy of the Yakuza.
I don’t think it is so much that the Japanese are savers, but rather that the criminal element has large bank accounts. If I were to expect a black swan anywhere, itwould be Japan.
Abe is working with a homogeneous population that is incredibly compliant and obedient who are willing to sacrifice themselves for the greater good of society. The exact opposite of what we have in America. The average Japanese citizen wouldn’t say “crap” if he had a mouthful of it. I thought the Japanese economy would blow up over 15 years ago. Today I’m convinced we’ll go down before they do. Once the credit cards stop working you’ll see riots in every major US city.
yep, Japanese are the exact opposite of what we have in America… and since that ain’t bad enough, we are letting more in for the free welfare. How stupid are Americans? Well, about this stupid:
The average imbecile he was approaching was likely in need of a sugar hit. It looked like a mild afternoon day in southern California. It’s a study of the obesity epidemics as much as anything to do with precious metals, but I digress.
That was pretty funny.
Never underestimate the stupidity of the average American. And make no doubt about it. Those were average Americans. And I say that as a red-blooded American boy who actually enlisted to defend what they’ve turned into a clown circus.
Long term we have no chance.
At least the Japanese have a chance.
In videos like that, they never seem to state what percentage of people didn’t act like idiots, something that would be very simple to do: “Out of XX people we asked, XX took the candy.” Why not? Because it doesn’t prove their point?
BTW, I’d have taken the silver bar, said “Thanks!” and immediately walked away to see what would happen. No way they’d let me keep it.
“Another year, another miss: Following a two-day meeting”,,, Funny how they’ve been having the same meeting for 30 years. They must love reruns in Japan.
In the latest ABC poll Trump has taken the lead over Clinton. One week ago the gap was 13% in favour of Clinton. I told you Mish: the race is FAR from over :-).
Yes … and THE KEY point is that the polls were tightening significantly before The Comey Show Friday.
Corrupt European press hastens to explain that the chance is small that Trump can win, even with this comeback. They said the same about Brexit.
Yes – race far from over now but it took an amazing action by Comey
The fact is that the ABC / Washington Post narrowed significantly prior to Comey.2.
Friday morning (before Comey) Clinton’s lead had shrunk from +12 to +4 in the matter of a few days.
Big late break for Trump (imo, due to 2017 health insurance premiums skyrocketing)
http://abcnews.go.com/Politics/contest-narrows-expectations-poll/story?id=43116832
Some opinion I had. It’s not at all amazing that we don’t hear anything about it in the MSM since their mention of it would call attention to the fact that premiums are greatly increasing even to those those who don’t use Obamacare and, therefore, didn’t get that bad news in the mail.
Those people who don’t use Obamacare being the youth who were supposed to support it, but who expect to use it in the future. And they vote Dem…
The same thing happens in the USC tracking poll. Trump has been trending straight up since 10/23 and now leads Clinton by 3.6pt from a deficit of -1.5pt. Note that the tracking poll is an average over 7 days so it won’t reflect the full impact of Comey until 11/4. At this moment, Trump has better than even chance of winning the election IMO.
http://cesrusc.org/election/
What many economists are missing is the super service inflation extant.
52 shot in Chicago over the weekend. 17 fatally. Homicide total so far for 2016: About 650.
No comment from the White House.
Where’s BLM?
And the EBT cards are still working.
Wait til they aren’t……
There’s the difference between Japan and America.
In Japan it would bring a family shame to receive EBT benefits.
In America it’s celebrated by over 40 million.
That is precisely the reason there is no hope for American long term.
Obama staying DC post January.
http://www.cnn.com/2016/05/25/politics/obama-kalorama-washington-dc-leases-house/
Running total infographics of Chicago violence:
http://heyjackass.com/
From CDC stats, about 60% of firearm deaths are from suicides using them, most of the rest is from minority on minority crime.
I once saw a Dem who was crying about easy to access to guns in other states being behind Chicago’s problem crushed by the retort that the areas with “easy” access to guns (in comparison with IL/Chicago) did NOT even remotely have Chicago’s gun violence problems and, therefore, the problem was due to something in Chicago and not due to the “easy” access to guns elsewhere.
Its so comprehensive. If our news was this complete, Clinton would have never gotten this far awY from prison.
Recent usdjpy strengthening likely a reflection of a Federal Reserve hell bent on raising interest rate before year’s end.