Charting Banzainomics: What The BOJ's Shocking Announcement Really Means

Tyler Durden's picture

Still confused what the BOJ's shocking move was about, aside from pushing the US stock market to a new record high of course? This should explains it all: as the chart below show, as a result of the BOJ's stated intention to buy 8 trillion to 12 trillion yen ($108 billion) of Japanese government bonds per month it means the BOJ will now soak up all of the 10 trillion yen in new bonds that the Ministry of Finance sells in the market each month.

In other words. The Bank of Japan’s expansion of record stimulus today may see it buy every new bond the government issues.

This is what full monetization looks like.

More from Bloomberg:

The central bank is already the largest single holder of Japan’s bonds, and the scale of its buying could fuel concerns it is underwriting deficits of a nation with the heaviest debt burden. The BOJ could end up owning half of the JGB market by as early as in 2018, according to Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo.

 

“Kuroda knows when to go ALL in,” Okubo wrote in a note. “The BOJ is basically declaring that Japan will need to fix its long-term problems by 2018, or risk becoming a failed nation.

 

The unprecedented efforts to stoke inflation could scare bond investors, said Chotaro Morita, the chief rates strategist in Tokyo at SMBC Nikko Securities Inc.

 

Kuroda said earlier this month that while the BOJ holds only about 20 percent of Japan’s outstanding government bonds, the Bank of England holds approximately 40 percent of U.K. government debt.

We wish Japan the best of luck in avoiding becoming a "failed nation."

Then again there is something to be said about a nation which is now desperately, and obviously to everyone, trying to unleash hyperinflation... and, for now at least, is failing.

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PontifexMaximus's picture

forget about the bonds, look for the ETF purchases!

DeadFred's picture

How long until they are majority owners of the companies? I couldn't find the data.

Xibalba's picture

It's the only play left for the Japs.  Back the NewYen with equity stakes in US companies and let the OldYen die with the population. 

Either that, or it's NukeYen

y3maxx's picture

...Japan could easily be WW3's Black Swan event.

Fukushima, Mathematically impossible to QE until 2018...BK country, Aging Population and Volcanoes

Pool Shark's picture

 

 

And some analysts still believe the fed will raise rates next year...

Yeah, right...

 

Publicus's picture

Nothing wrong with printing money to fund economic activity instead of tax.

Pure Evil's picture

Now if we could just get the plans for the Death Star drawn up, Hillary would look fantastic in that black helmut.

Only question left to answer is who will play Darth Sidious?

 

Remember kids, only the Evil Empire can create jobs.

MeMadMax's picture

So is there ANYONE else buying these bonds?

 

From the looks of it, not even a homeless guy is...

 

^.^

economics9698's picture

Public debt 226% of GDP, paying it off with inflation.  What a bunch of assholes these bankers are all over the world.

dontgoforit's picture

Bernakisan has taught them well, no?

Manthong's picture

It’s all good as long as long as there is no Ponziness in the policy.

 

Four chan's picture

its just the same as the move by the fed, the race to the bottom of valuation wont end until the paper reaches its intrinsic value. zero.

FMR Bankster's picture

Population aging rapidly, fewer workers every year but old age pensions and health care expenses mounting, what's the solution? Print up a bucket full of yen and use it to buy productive assets on a worldwide basis. Those Exxon dividends will come in handy. Wonder how long these chumps will keep taking the yen we're printiong up? Can't be forever, we'd better speed up the process before they catch on.

ATM's picture

First to beggar thy neighbor is the winner.

FMR Bankster's picture

Population aging rapidly, fewer workers every year but old age pensions and health care expenses mounting, what's the solution? Print up a bucket full of yen and use it to buy productive assets on a worldwide basis. Those Exxon dividends will come in handy. Wonder how long these chumps will keep taking the yen we're printiong up? Can't be forever, we'd better speed up the process before they catch on.

FreedomGuy's picture

It's not just the bankers. They are the bartenders and the government is the drunk with cash and a gun.

In the end it is about whole populations believing in the myth of the genius and benificence of the central planners. Japan just fully doubled down and stocks responded positively, not negatively. This tells me they are trapped and not very good economists/monetarists themselves. They, too are believing in the Central Bank Fairies.

KnuckleDragger-X's picture

The death star will be built by government contract with kickbacks priced in.....

Uber Vandal's picture

@ Pure Evil:

That question is easily answered, simply refer to the video below.

https://www.youtube.com/watch?v=AEsdl0jft1o

Darth Sidious will be played by the former Pope Benedict XVI, Joseph Aloisius Ratzinger.

StychoKiller's picture

So long as I get to vacation on Naboo...

ThroxxOfVron's picture

"Nothing wrong with printing money to fund economic activity instead of tax. "

I agree -under certain conditions.

The problem is that taxes on INDIVIDUAL LABOR and consumption are rising while corporations and the Owners and Managers of the corporations are being relieved of the duty to innovate and compete and fail when they cannot.

The productivity of the World is being aggregated into a few hands who are not themselves productive in any traditional sense.

The Citizenry are being devoured/liquidated by the neo-Globalist neo-Fascist complex via the Central Banking Cartel and it's political affiliates.

yogibear's picture

The Fed can't raise rates.  The market will have to force them.

PT's picture

1.  Hyper-inflation can only happen if prices go up.
2.  Prices can only go up if wages go up so people can support the new prices.
3.  Unless, of course, people borrow money and don't have to increase repayments beyond their wages ( which leads to Ponzi Finance ).

I guess when prices go up 1000% in one week, employers will have no choice but to pay their workers ten times more.  But I still have trouble imagining the mechanism that lets hyper-inflation take off.  I feel like something is missing.  Can anyone enlighten me here?

Business failures and scarcity?

Bioscale's picture

At point 2 you forgot that prices go up if the dollar tanks. No need for wages going up.

PT's picture

Prices go up but nobody can afford to buy.  What happens next?
What happened in Weimar?
These days we have stupid people, credit cards and equity loans.  It may take a little longer but then it will be more vicious.

Not My Real Name's picture

Hyper-inflation can only happen if prices go up.

No. Hyperinflation is the result of a crisis of confidence in the currency. Skyrocketing prices are a symptom of hyperinflation.

Almost Solvent's picture

Exactly.

 

Hyperinflation is a terrible term. It implies super really crazy high inflation.

 

It really means deathbed of a currency.  

Not My Real Name's picture

Saying hyperinflation can't start without high prices is like saying you can't catch Ebola without a fever.

eishund's picture

"But I still have trouble imagining the mechanism that lets hyper-inflation take off.  I feel like something is missing.  Can anyone enlighten me here?"

 

The $ right now is being churned amongst financial assets, real estate, ponzi start-ups, bank reserves etc.

We are already seeing the symptoms of hyperinflation.

Look at the SP500. And, check out what you buy next time. I think ZH has a writeup on shrinkflation. That is also a symptom.

PT's picture

Thanks everyone for trying to answer me.  I haven't seen the answer I am looking for.  Perhaps I need to reword the question.  I'll have a think about it.

FreedomGuy's picture

I think the hyperinflation has not set in for several reasons:

1. Demand is not there. Economies and new economic opportunities are not there. It is the irresistable force of inflationary monetary policy meets the immovable object of government's ability to wreck an economy. While earnings are decent at companies, no one has a rosy view of the future so hiring, promotions and pay raises are not taking off which are all signs of a vibrant economy.

2. Much of the money actually sits in bank reserves. It is not actually in the economy doing much of anything and it is not moving. There is very little velocity which is a key component of high or hyper inflation. If anyone did an actual Bernanke helicopter money drop of free money it would start to move rather rapidly.

3. The demand for money is still relatively high. Hyperinflation is a rejection of the currency. People's incomes are still stressed and debt levels are still high. Any extra money that comes along still has value whether it goes to debt reduction or a new HDTV. As long as there is a demand for the currency it will retain some value. Gold prices are a bit of a reflection of this.

 

DrDinkus's picture

just wanted to let you know I am dressing up as your avatar tonight. any tips/sayings? planning on drinking too much bourbon and shouting BUMBLES BOUNCE until i forget about the farce that the mkt has become

LawsofPhysics's picture

Bingo.  Remember, when fraud is the status quo, possession is 100% of the law.

 

If I have oil and other resources in my possession I can still survive/thrive.  I do not have to sell you shit, especially if I don't want your bullshit paper promises.  You can simply fuck off and die.

tmosley's picture

"2.  Prices can only go up if wages go up so people can support the new prices."

Zimbabwe shows that that is not the case.  Most hyperinflations don't feature wages that rise anywhere close to as fast as prices.

Hyperinflation in fiat terms is deflation in gold terms.  Liquidity becomes the most valuable thing you can own.

lasvegaspersona's picture

Hyperinflation is not the result of increasing wages. It is overprinting of the currency. We (USA) already have enough in outstanding bonds that we could have HI tomorrow. If there is a rush to sell those bonds and then use the cash generated by the sale, we could see something other than stock prices rise (what you thought stock prices were rising due to excellent corporate earnings?)

We could see gold spike or at least completely deplete all the physical available which would collapse the paper gold market which would kill the Forex market which would give you your HI before breakfast.

All the pieces are in place and the control rests, not with the FEd but with those who hold all of our paper. Who knows, if it looks like Japan is going the HI route maybe a critical mass will panic early.

These are very unstable times and the very indicators that make things seem to be going well are really signs of the unseen danger just ahead. 

Review the history of the stock markets in Zimbabwe or any other country that eventually hyperinflated. Look long and hard at the market in Japan today...we see a 1100 point rise just because everyne knows the Yen is going to lose value. That is a severe sign of sicknes in the system not a sign the Japanese economy is about to excel.

Most of us know what is coming. I think it is just hard to say...OMG it is starting to happen, but it is.

Wild Theories's picture

hyperinflation only happens when confidence in the currency is completely lost

in other words, it will be a political happening, it won't be pure economics anymore

akin to losing one's faith or religion, in currency terms

Marco's picture

There is nothing mathematically impossible about the QE ... in fact the BoJ holding a greater percentage of the outstanding bonds will actually reduce the risk of currency collapse for Japan. It's the fact that savers/speculators hold so many bonds which creates the risk.

Lets say BoJ ends up holding all of the outstanding bonds, then there is nothing left for the market to dump to crash the Yen (they have to muddle along during the transitition of course and the inflation of the monetary base will still create inflation of course). The Yen then depends on Japan's trade strength and the discipline of the government to keep deficits down (discipline which governments generally don't have without the bond market, but I give Japan a better shot than most). In the end Japan's trade deficit is a greater danger to the Yen than the BoJ IMO ... turning all the nuclear power plants back on should help a lot in that respect.

ATM's picture

All of those trillions of yen that the BOJ prints to buy JGBs will flow directly into the Japanese economy as the government spends them on old age pensions, interest payments to bond holders, government works, etc. What that does is direcltly dilute the value of outstanding yen.

It also makes that carry trade ON again. Borrow yen buy everything and anything and repay with worthless chits of paper.

The race to the bottom is getting ready to start full steam, after the Japs have gotten a couple second head start. Can't wit to see who is next.

Marco's picture

As I said, it will still cause inflation ... but with a steady state inflation it doesn't allow carry trade, it's priced into the interest rates.

IF they can muddle on towards a new steady state without a disastrous drop in confidence and keep deficits under control continuing QE is not mathematically impossible IMO. The IF might very well be practically impossible though.

TruthInSunshine's picture

Remember that BOJ is official Bad News Bears of CBs, and that BOJ Monetary Policy has Mothra-esque half life.

Ness.'s picture

+80 trillion for the Mothra reference.

Colonel Walter E Kurtz's picture

To everyone sitting on the board of directors - You think Icahn and Ackman are bad, wait until the Fed/BOJ/ECB are your largest percentage shareholders. You'll be taking direction from Abe, Draghi and Hillary/Jeb!

KnuckleDragger-X's picture

I'm looking forward to it, Ayn Rand will be shown to be an optimist.....

kliguy38's picture

Kramer's babbling that right now on CNBS and I'm LMAO..........

Divided States of America's picture

The Jews on CNBC are going all out to sucker the sheeple into stocks....I mean they have been cheerleading on a daily basis the past 2 weeks since that 'correction'....If I could get a list of the guests that has gone on CNBShit the last 2 weeks, I guarantee you that 3/4 of them were Jews.

SMG's picture

Go somewhere else troll.  How are things at the NSA? I can't believe they can spend my tax money for you to sit there all day to try and divert blame from the Luciferian Oligarchs. 

Divided States of America's picture

Dude...its a fuckin fact....look on CNBC right now.. Starbucks' Schultz is chatting with Cramer....

TheReplacement's picture

If they show it to you it is meant to be seen.  Consider that for a moment.  Now ask, what are you not seeing?

The greatest trick the devil ever pulled was convincing people he didn't exist.  Or something along those lines.

Pure Evil's picture

The greatest trick the Devil is currently pulling is convincing you that he only wants your soul for handing out favors.

What he really wants is for you to do his dirty work while your living, he has little use for you or your soul after your dead.

Once he has control of your inner conscious he has everything he needs.

StandardDeviant's picture

Really.  Where do they get these mouth-breathers?

On the other hand, perhaps it's just software - some sort of Markov chain code.  Wouldn't surprise me a bit.