This page has been archived and commenting is disabled.

BOJ Warns Monetization May Lead To Severe Inflation, Rise In Long-Term Interest Rates; Yet Will Buy ¥350 Billion In Bonds

Tyler Durden's picture


It appears not only Bill Gross is insane enough to realize that direct monetization = inevitable interest rate hike. Slowly, even the central banks are starting to gravitate toward this conclusion.  From The just released minutes by the BOJ: "One member -- referring to some recent views that the Bank should underwrite JGBs to fund restoration and rebuilding -- expressed the opinion that such an action might initially seem to work well, but lessons drawn from history showed that it would eventually result in severe inflation and thereby inflict substantial damage on people's living situation. This member continued that the Bank needed to keep working to gain the wider public's understanding on this point. In relation to this, a few members expressed the view that, if confidence in the currency were impaired due to underwriting of JGBs by the Bank as the central bank, this might lead to a rise in long-term interest rates or instability in financial markets, and hamper the smooth issuance of JGBs." Something tells us this "member" was not Bernanke (aside from the obvious reason that Benny is a gaijin). And where else, we wonder, have we seen this: an initial boost which fades away, leaving just concerns about runaway inflation. Is it possible that the dissident BOJ member can come to one or more FOMC meetings and actually give our clowns a first person perspective of how this whole "deflation battle" goes down 30 years in.

Other comments from the minutes:

Regarding U.S. and European financial markets, stock prices in major economies fell temporarily and long-term interest rates came under downward pressure, as investors' risk aversion had heightened due to increased tension over the situation in North Africa and the Middle East and to the disaster in Japan.

On crude and supply/demand mechanics:

As for international commodity prices, while prices of nonferrous metals and grain had shown some signs of adjustments, crude oil prices had climbed due to growing demand from emerging economies, accommodative financial conditions around the world, and uncertainty about the situation in North Africa and the Middle East.

On Japan's view of the US:

Private consumption had been firm mainly due to the effects of the fiscal stimulus measures; nevertheless, balance-sheet adjustments continued to weigh on household spending. Housing investment remained at a depressed level. As for prices, the effects of the rise in international commodity prices were increasing somewhat, while an expansion in downward pressure on prices -- associated with slack in supply and demand conditions in the goods market and the labor market -- was restrained.

Japan on China:

The Chinese economy continued to show high growth. Exports and production had been increasing, and growth in private consumption had been firm due mainly to households' increased income levels. Economic conditions in the NIEs and the ASEAN countries had been recovering. In many of these Asian economies, inflationary pressure remained high, reflecting greater utilization of production factors and the effects of the increase in international commodity prices.

And lastly on the impact of the earthquake on Japan:

As for the effects of the disaster in Japan, it was possible that supply-chain disruptions of automobiles and electrical machinery would exert downward pressure on production in the short term, particularly in Asian economies. Although there was a view that the effects of the disaster would not last for a protracted period and would remain marginal, as restoration of production lines and a shift to substitutes proceeded, this view was attended by a high degree of uncertainty.

And to top it all off, is the BOJ's announcement that it will buy ¥250 billion worth of bonds with a 1-10 year maturity, and ¥100 in bond maturing between 10 and 30 years from now. Good to see they have learned their 30 years worth of lessons.

Full minutes (link)

BOJ Minutes May 9


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sun, 05/08/2011 - 21:29 | 1254308 djsmps
djsmps's picture

A blinding flash of the obvious?

Sun, 05/08/2011 - 21:46 | 1254337 Rynak
Rynak's picture

grml... how do i post an image?

Mon, 05/09/2011 - 04:12 | 1254783 Popo
Popo's picture

So... yen to the moon?

Sun, 05/08/2011 - 21:32 | 1254315 Yen Cross
Yen Cross's picture

And what is the purchasing mechanism! For THOSE J.G.B.s? UST 10's!

Sun, 05/08/2011 - 21:37 | 1254320 Atomizer
Atomizer's picture

Warning Will Roger, derivatives. Warning Will Roger, derivatives

Open the Pod door please HAL.

Its coming soon. Backs are to the wall.

Sun, 05/08/2011 - 21:45 | 1254333 Quixotic_Not
Quixotic_Not's picture

BOJ Warns Women Sex May Lead To Pregnancy, Rise In Short Dicks Noticed At Press Conference; physical Ag/Au?

Sun, 05/08/2011 - 22:06 | 1254377 mynhair
mynhair's picture

Better physical....Viagra?

Even betterer, does anyone really give a shit anymore?

Sun, 05/08/2011 - 23:02 | 1254485 Flakmeister
Flakmeister's picture

Back in 2000, the Japanese sent 1,000,000 doses of Viagra to the US. They had heard that their US allies were having trouble having an election...

Rim shot....

Sun, 05/08/2011 - 22:11 | 1254388 jtmo3
jtmo3's picture

Horse crap. We're printing in the US like there's no tomorrow. Where's the inflation here? Big Ben insures us that there's little inflation and what there is is temporary. Print away BOJ.

Sun, 05/08/2011 - 22:14 | 1254396 mynhair
mynhair's picture

That ain't inflation you are smelling, it's Global Stinking.

(Also why Algore disappeared.)

Sun, 05/08/2011 - 22:23 | 1254418 Long-John-Silver
Long-John-Silver's picture

We're printing in the US like there's no tomorrow.


There is no tomorrow for the US Dollar. TPTB want an "international" currency for their one world government. The US Dollar must be destroyed for that to happen.

Sun, 05/08/2011 - 23:56 | 1254448 Quixotic_Not
Quixotic_Not's picture

There is no tomorrow for the US Dollar. TPTB want an "international" currency for their one world government. The US Dollar must be destroyed for that to happen.

Au contraire Long John,

The grand plan of the Bankster tribe is to export USofA inflation to developing countries and continue the extraction of wealth from the peaseants - Money for nothin', chicks for free.

Of course, with external sovereign purchases of treasuries not equal to or greater than (D) & (R) Free Shit Empire™ spending, the Fed Mafia  switched over to holding treasuries until developing countries can be convinced once again to pick up the slack...and trust me, they will.

No matter what, the bankster tribe gets their vig, even if the money created from thin air implodes due to lack of real buyers (unlikely scenerio).

The petro trade won't be abandoned unless a World War says otherwise...

Sun, 05/08/2011 - 23:12 | 1254503 Libertarian777
Libertarian777's picture

there's no inflation.


I hear the iPad 3 will be twice as fast as the iPad 2 and cost the same!

that's deflation!

Mon, 05/09/2011 - 04:18 | 1254787 Overflow-admin
Overflow-admin's picture

"twice as fast as the iPad 2 and cost the same!

that's deflation!"

So considering hardware industry: Intel 8086 4.77Mhz in 1978 -> Intel core i7 3.46Ghz nowadays. Do you really think hardware industy evolution has anything to do with inflation/deflation?


Maybe you found what's offsetting inflation. (sarc. indeed)

Sun, 05/08/2011 - 22:16 | 1254403 km4
Sun, 05/08/2011 - 22:33 | 1254413 mynhair
mynhair's picture

Nippon does not have enough room for all the hamster cages necessary to generate 'green energy', got it?

You ever started a fire by rubbing two sticks together?

Don't get me wrong, I am all in favor of reducing the World's energy needs by

redundencing all Libs.

Sun, 05/08/2011 - 22:52 | 1254474 Milstar
Milstar's picture

What else should they do?  They have no resources, nuclear is already embedded and they are already cannot produce enough energy for their needs at this moment.

Sun, 05/08/2011 - 22:42 | 1254459 buzzsaw99
buzzsaw99's picture

¥250B, that's like three fiddy American. The Japanese are pikers.

Sun, 05/08/2011 - 23:40 | 1254569 PulauHantu29
PulauHantu29's picture

No one cares about inflation; the banks must be saved at all BOJ issues 350 billion in Bonds.


Mon, 05/09/2011 - 08:55 | 1254861 Sudden Debt
Sudden Debt's picture

Finally you understand.

And high inflation numbers mean high interest rates so they can even make more money.







What I don't yet understand is why they can't force the army yet to shoot down eventual protesters and black up the media even more...

If really nothing would reach the media, everybody would be kept so stupid that nobody would ever know and they could blame it on somebody they never seen or met before...



Sun, 05/08/2011 - 23:54 | 1254601 AUD
AUD's picture

Might lead to instability in financial markets?

Mon, 05/09/2011 - 03:29 | 1254772 sbenard
sbenard's picture

I keep remember the trite cliche that "when the only tool you have is a hammer, everything looks like a nail".

Central bankers will continue the same path until they create an even worse crisis. Plan and prepare accordingly.

Mon, 05/09/2011 - 04:08 | 1254780 ebworthen
ebworthen's picture

"Godzilla is coming!  Put all the rice in the large warehouse next to the electric power plant with high towers and lines, then send the tanks and jets to piss him off!  Hurry!"

Mon, 05/09/2011 - 05:02 | 1254798 anvILL
anvILL's picture

I am having some trouble finding the source of this information.
>BOJ's announcement that it will buy ¥250 billion worth of bonds with a 1-10 year maturity, and ¥100 in bond maturing between 10 and 30 years from now.

Can somebody help me out?

Mon, 05/09/2011 - 05:48 | 1254807 AAPL_Short
AAPL_Short's picture

Read this. Someone must send this to Tyler ASAP.

Mon, 05/09/2011 - 07:26 | 1254858 Sudden Debt
Sudden Debt's picture

Let's just wait and see if it happens when they monetize the rest of the 14 trillion.

Problems only exist when they happen.


Do NOT follow this link or you will be banned from the site!