News Updates 4 U: Whatever

Monday, March 4, 2013

Japan Central Bank Nominee Pledges to Do Whatever Needed to Combat Deflation; Mother of all Pyrrhic Victories

Those who thought Japanese Prime Minister Shinzo Abe was not serious in his pledge to defeat deflation (and destroy the Yen in the process) need think again.

Haruhiko Kuroda (Abe’s nominee to head Japan’s central bank) pledges to do Whatever Needed to Combat Japan Deflation.

Haruhiko Kuroda, nominated to be the next Bank of Japan governor, said that a central bank under his leadership would do whatever is needed to combat 15 years of deflation.
“I would like to make my stance clear that we will do whatever we can do,” Kuroda, the president of the Asian Development Bank, said in a confirmation hearing in the parliament in Tokyo today.

Prime Minister Shinzo Abe’s nomination of Kuroda has raised expectations for more aggressive monetary easing to revive the world’s third-biggest economy after Masaaki Shirakawa exits the job on March 19. The opposition Democratic Party of Japan, the largest party in the upper house, has signaled it will back Kuroda, easing his passage through a split parliament.

Kuroda said in an interview this month that falling prices exacerbate real debt burdens, and give an incentive to companies and households to postpone spending. Consumer prices excluding fresh food fell 0.2 percent in January. The price gauge hasn’t advanced 2 percent — the central bank’s new target — for any year since 1997, when a national sales tax was increased.

Mother of all Pyrrhic Victories

Any country determined to wreck its currency can indeed do just that. However, QE alone will not suffice if all the printed money sits as excess reserves. If QE fails, what’s next? More bridges to nowhere?

Regardless, the idea that higher prices are a blessing is blatant stupidity. The last thing aging Japan citizens need is rising prices.

If anything, low interest rates are counterproductive because Japanese savers get zero % on their savings (having less interest income to spend). Sound familiar? It should because Bernanke has the same preposterous ideas.

Once sentiment turns (and it will – but I do not know when), Japan is going to have a hard time preventing the bottom from falling out of the yen. When that happens, the defeat of deflation is going to be the mother of all Pyrrhic victories.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mish’s Global Economic Trend Analysis

Japan Central Bank Nominee Pledges to Do Whatever Needed to Combat Deflation; Mother of all Pyrrhic Victories

Sunday, March 3, 2013

What Happens If "Whatever It Takes" Is Not Enough?

Since promises are as good as gold (or better apparently) for the world’s central bankers, the BoJ’s new man Kuroda dropped those three little words that worked so wonderfully for Draghi back in July. At 1943ET, Kuroda told the world he would do “whatever it takes” to rid his nation of the ravages of deflation. However, unlike the 200 pip rally in EURUSD that Mr. Draghi’s soothing words created (and a risk on rally that last for months); it appears the world’s investors are a little tired of that ol’ chestnut. Since Kuroda opened his mouth and kept promising moar and moar (open-ended buying of longer-dated bonds), the Nikkei has dropped over 100 points and USDJPY has strengthened 60 pips and rising. The question now becomes, what happens if ‘whatever it takes’ is not enough? Meanwhile the JPY strength is wreaking mild havoc with US equity futures which have dropped 6 points from Friday’s close.

When Draghi spoke the magic words…