"If The US Can Do It, So Can We": Japan To Keep Pumping Cash And Monetizing Debt Until Deflation Goes Away

Tyler Durden's picture

And with that Japan joins the competitive devaluation currency race, in which both the SNB and Federal Reserve have a substantial head start (the euro and the fat Brussels bureaucrats are in a ouzo daze, with no clue what the hell is going on). Speaking before lawmakers BOJ governor Masaaki Shirakawa, who recently said Japan was powerless to fight deflation on its own, has changed his tune, and today said that Japan will print the kitchen sink if it has to to beat "stubborn deflation."

In a speech before the Lower House Budget Committee Shirakawa said that not only will Japan continue monetizing its debt (at least unlike Bernanke, he admits it), but that they will happily accelerate this action if it means killing the Yen and creating a glimmer of hope for inflation. Carry traders everywhere rejoice.

"Overcoming deflation and returning to a sustainable economic recovery path under price stability remain a vital issue for the BOJ. We will continue injecting ample liquidity into financial markets to  overcome deflation."

Shirakawa noted that monetization is happily chugging along: "We are buying JGBs in order to inject ample funds into financial markets in a stable manner and we are buying Y21.6 trillion of JGBs annually" and he made it clear that adjusting for scale differences, the Japanese monetization program is three times faster than the Fed's Treasury QE - in other words assume that Japan has bought the equivalent of nearly $1 trillion of its own bonds, adjusted for something or another.

And rising the specter of Richard Koo, Shirakawa also added that excess liquidity alone would be insufficient, saying that new initiatives from the government and the private-sectors would be needed to generate new demand.

The US and Japan... soon China and the ECB - why all the concerns about who will buy each other's sovereign debt? In a few months each central bank will purchase every single piece of paper printed by respective Treasury departments. Remember - whoever devalues last, loses.

And as all this is happening, Goldman's pundits repeat every five minutes that China will inflate the yuan... just because, you know, it doesn't really need to export any more.

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cocoablini's picture

Because it's been sooooo effective for the last 30 years...

Good luck on that one

Anonymous's picture

This is the ultimate logical end game for the globalization and trickle-down economics nonsense that's been hyped up by the Wall Street Financial crowd these past 25 years.

The outcome isn't pretty. Thank you Alan Greenspan.

Anonymous's picture

This has nothing to do with globalization or trickle down economics. It has everything to do with governments that spent more than they could ever repay, and central banks who encouraged it by providing easier monetary policy at every step of the way. This is a failure of socialism and big government, not capitalism nor free markets.

Harbourcity's picture

Looking forward to that $80 beer next Friday.


tahoebumsmith's picture




... Or better yet, how about a game of " Kick The Can" ?

Anonymous's picture


And so we approach the precipice...

...the world barter system is coming
to a neighborhood near you. Buckle up,
cuz it's gonna be a rough ride Amorica.


Mr Lennon Hendrix's picture

"Stubborn deflation", now there is a concept.  Maybe if we degrade it first.  "Bad deflation!  Bad!"  

Gold set to kill like a Samurai.  AFter all, the Japanese want their gold back.

This is a cheer from a pep rally led by Governer Shirakawa:

Hyper!  Inflation!  Hyperinflation!  Give me an H!!!!!!!!!!!....Go team!

girl money's picture

Cool!  While our Community Organizer in Chief fixes those pesky health insurance premium increases, Japan's MoreSaki will print enough yen to buy that whole stack of Treasuries to be auctioned this week.  

Stir in the Lufthansa strike, and this week is looking pretty entertaining.

Anonymous's picture

Eh. A strike at a flag-carrier airline is pretty much business as usual in Europeland, especially during a recession.

darkpool2's picture

Well in a strange dream, the Yuan had doubled and chinese real wages surged---exports held up ok because the manufacturing bases of their trading partners had been wiped out---and besides, China had outsourced many things to their "partners" US import inflation was through the roof and the real standard of living of the average American was off 20% The UK tried to devalue its way to prosperity- fools, it just doesnt work.

Miles Kendig's picture

Fresh batteries have been installed in the global monetary close and play record player.  But hey, they obtained them from Wal Mart so who knows how many minutes this set will last.

godfader's picture

Where's the hyperinflation in Japan? All the inflation scaremongers can't explain this so they never mention it.

Burnbright's picture

Actually its pretty easy. It depends on who is getting access to the money. So for instance in the US all of our QE efforts went primarly to banks to pay off their debts. Instead of wiping the debt out, like would of happend had no one intervined, the money was used to keep failing business afloat. Hence wealth was transfered from everyone with savings to the bankers. So the effects of that are what ever the bankers spend their money on inflates, and everything else deflates because the banks end up representing a larger portion of the market "demand" while the rest of the population gets priced out of those markets that the banks particpate in.

Anonymous's picture

So hyperinflation cannot happen. Cool.

Harbourcity's picture

You know that is the best explanation I have heard in a long time.  It is succinct in how it explains how inflation and deflation can exist at the same time.

Well done.


Anonymous's picture

mista god fodder, in the company of a majority of congress and untold talking heads, another one who doesn't understand:

*inflation is moneysupply.

*price increases is a symptom.

*deflation is a freemarket correction, and a good thing.

Anonymous's picture

Should be dollar positive!

dark pools of soros's picture

silver running out!!!  buy buy buy!!


seriously this is like 7 year olds playing monopoly and handing out money just to keep everyone in the game forever

Cyan Lite's picture

All the bears tomorrow will claim "Short Squeeze!"  or that the "market will fall apart any day now". 

Meanwhile carry traders around the world rejoice...

Anonymous's picture

Defective Toyotas kill 100 Americans in last 10 years...Defective US foreign policy and cover-ups by US government killed 10,000 Americans and 500,000 foreigners in last 10 years.

Which defects should congress be investigating?

Any investigation into the EPA claims that the air downtown on 9/11 was safe, whilst all the rescue workers are now dropping dead? Any investigation as to why they failed to stop those terrorists getting on those planes. Any investigation as to why George Tenet was wrong about WMDs. Any investigation as to why Osama hasn't been caught or killed...

Yeah, lets get Akio Toyoda on the hot seat. Go America, F*ck Yeah!

Anonymous's picture

Quit your belly aching and invest in defense stocks moron.

VegasBD's picture

Its so cute when Anon's fight.

plocequ1's picture

You know the saying, Whatever works.. The goal is to make the stock market go higher and to see the rich get richer. Its working. Nikkei up 2.7%.

Anonymous's picture

There is a weird thing about the carry trade. When central banks provide more liquidity than is need to supply the domestic market with its need for a medium of exchange, (thats liquidity right? the medium of exchange), the remainder can be used to purchase foreign goods or make investments on foreign shores.

That's the origin of the term carry trade. It used to be gold that had been freed up by the advent of fractional reserve baking that was used. After all who would trust paper from a foreign state?

So theoretically all this excess liquidity gets used by the banks to speculate in foreign markets. They just don't need it domestically. Now these are the too big to fail banks that when their speculations land them in the crapper get bailed out by the government effecting a transfer of wealth form the citizens who save to the naughty banks who speculate.

If I were a Japanese saver, and they are renown for it, I would be hopping mad.

Anonymous's picture

But, don't Japanese savers convert their savings into gold regularly from their salary?

Their store of wealth isn't their own national currency. So, inflating their medium of exchange shouldn't affect their store of wealth. This implies that BOJ QuEasing will destine to fail because Japanese simply won't spend regardless of how much inflation is in the money supply.

jm's picture

But, don't Japanese savers convert their savings into gold regularly from their salary?


Where did you find this info?  The data I've seen doesn't suggest it.

godfader's picture

The rich lose real wealth with money printing. They own money. The poor get richer with inflation. They owe money (have debt) and get to keep their jobs. The poor hurt in deflation. They get fired and get to stand in the bread lines, while their debt stays.

Anonymous's picture

These days, most rich people hide wealth with tons of debt. How fast they can liquidate their assets to pay off debt, will be an important question.

Anonymous's picture

Because the poor hold debts? Oh, by poor you mean US citizens, I get it.

Anonymous's picture

wow, how true. with constant monetary inflation for many years the rich has been getting poorer and the poor has been getting richer.

Harbourcity's picture

Since there is no inflation but instead deflation (seen the cost of a Plasma TV lately) it is the poor who is being affected since Ben is working at creating deflation.


TumblingDice's picture

Rich don't own money, they own capital that is denominated in dollars. The poor get paid in dollars. In a naturally (sans central banker intervention) deflationary environment such as this any attempt to create inflation will lead to the greater growth of debt in relation to wages. That is because there is an order to creating inflation: you have to create the debt first and then you have to move it enough times through wages and commerce. When there is no movement but a lot of debt creation it is those involved in the step of debt creation that benefit the most, while those involved in the money movement benefit the least.

In terms of deflation, there have been so few instances of it in the Fed Rsve history that it is difficult to tell what kind of effect it might have on wage and wealth inequality.

suteibu's picture

Thanks for some fresh air.  The inflation hawks claim the world will fall apart without inflation.  No one knows the long term effect of deflation.  In a technological world, it seems that deflation of consumer prices should be the result of increased productivity.  As for debt, it will hurt but eventually it will separate the productive debt from the lifestyle debt...which is a good thing.  But it won't hurt any more than the collapse of this current ponzi scheme.

trav7777's picture


The rich gain from inflation...look at global wealth distribution.

This is because the rich can use the inflation availability to lever.

QE is not printing per se, it is the CB buying debt.  Again, the notes issued by the CB have debt tied to them.  Instead of lending to private citizens, they are lending to the gov't and creating dollars/yen/whatever that are still *lent* to someone.

Mr Shush's picture

This is so wrong I don't know where to start.

The rich own assets, not money. Cash and fixed income investments represent only a tiny part of their overall wealth. In many cases, they hold vast amounts of debt, either personally or through companies they own outright or have major shareholdings in. Inflation increases their real net worth by increasing the nominal value of their assets without increasing the nominal value of their debts. For the same reason, it is a boon for young-middle aged middle and upper middle class homeowners who have substantial mortgage debts. It is a killer for older middle class people, whose mortgages are paid off and pensions (their other main asset and primary future source of income) are likely to be invested substantially in fixed income. It is also bad for non-homeowning wage earners, as wage inflation at the lower end rarely keeps pace with price inflation in daily necessities.

Deflation is bad for the rich: the nominal value of their assets falls, while their nominal debt remains constant. It is a disaster, above all, for highly leveraged rentiers.

The reason inflation is usually (mistakenly) assumed to be good for ordinary people is that it usually occurs in times of growth, while deflation (insofar as it has existed during the period for which we have meaningful data) has generally coincided with economic contraction. Economic contraction is bad for everyone except would-be dictators, but I am very far from convinced that it is liable to be caused by deflation: I think it far more likely that both are parts of the inevitable hangover from a credit binge such as the one from which the developed world is beginning to (painfully) come down. To pin the blame for depressions on deflation, in my opinion, is rather like accusing your vomiting of causing your nausea.

Anonymous's picture

Japan has nested their debt within US debt, they are protected.

plocequ1's picture

You are right. Im beyond giving up. I only hope one day this Ponzi sceme ends.

Anonymous's picture

It's time to buy stocks in paper production plants! :)

GlassHammer's picture

Insanity thy name is Japan.


Japan needs to get back to its 2 long term goals:

-Building Mecha Godzilla 

-Producing the latest season of Ninja Warrior

ratava's picture

Eurocrats seem quite good at competitive devaluation. Why print money or blow it on interventions when you can just spread some rumors, act completely clueless and watch Euro go down as exporters rejoice.

Anonymous's picture

Yeah...hear that "giant sucking sound" ?

So the politico economists.....the ones who did not see the debacle coming....now have all the answers....

It is like a giant "big rat" experiment....


Let's make this simple....

The are ten neighbors in a neighborhood...

They all owe each other money....and they all have lost their cash flows....which means that their sources of money
are no longer functioning....

So they all get together except for one ...the one who saved money....and agree to fabricate all the money each other needs....The saver hears about it....is very unhappy....but the saver is outnumbered 9 to 1....

They all feel good because they have something to pay....


Ok so how does the story end ?

The story ends when the other neighborhoods stop accepting the fabricated money....and the saver loses along with the fabricators in the neighborhood because the savers money has the same label...

Or is it going to be the case that all neighborhoods end up the way....and thus keep accepting each others fabricated money....

It does not matter about the "hard work" money...because the label is the same....Have the reckless fabricators gyped the real savers ? Absolutely....

So what do the real savers do ?

They lose....

Who wins ? The first fabricators first payouts....

Who loses at the end of the game ?


Loses what ?

The value of their currency....


So what is a solution ?

Scarcity of currency.....

Thus the government can enforce scarcity or abundance of money....

Simply raise interest rates so high that no one can afford more currency....making it more scarce....

Anonymous's picture

How come nobody yet introducing QE for gold bullion ?

Anonymous's picture

They have W for gold bullion. ;)

Anonymous's picture

FFS, what a leadership this world got.

First they moan when a sudden tsunami hits land and the houses shatter by force... (inflation)

Second the 'liquidity' retreats and the 'new normal' has to be sustained so our saviers go and replenish the waterlevel as the water tends to retreat... (deflation)

Third argument: As long as the wreckage stays in place, we haven't lost anything. But as soon as the water heads out of an asset, it never comes back and we have to 'write it off' the map...

Hows that for retarded logic!? That our leadership...FFS.

Anonymous's picture

This can't end well.