Friday, January 29, 2016

Japan – Mr. Kuroda shocking the markets – Sü

  • Who hath shall be taken: Japan’s banks will have to continue to pay a negative interest rate, if they park their money with the central bank rather than lend it
  • This should help Japan’s economy.. But above all, the young and the old Japanese lacks money to consume.
analysis Christoph Neidhart , Tokyo

The monetary policy the Bank of Japan has already unprecedentedly radical. Now the Bank of Japan has decided another measure: It introduces negative interest rates. Instead of the previous 0.1 per cent interest to obtain, Japan’s commercial banks need to continue to pay on their deposits with the central bank’s 0.1 percent interest rate. Whoever has will be taken.

In order for the Bank of Japan will encourage the financial institutions to grant loans of the economy increased. The newly printed money will go into circulation, not as before to lie to a large extent with the banks. However, little demand exists for loans. In particular, large corporations are sitting on huge cash reserves itself.

The decision comes very surprising. A few days ago, the Japanese central bank chief Haruhiko Kuroda told the World Economic Forum in Davos that there were no plans to introduce negative interest rates. The Asian stock markets reacted positively, prices rose noticeably. The other measures of the Bank of Japan, its purchases of securities in the amount of about 4.5 billion euros per year and the acquisition of government bonds for 80 billion yen, approximately 600 billion euros, continued unchanged.

With the purchase of government bonds financed the Central Bank, the deficit of the indebted country which has received loans totaling 250 percent of Japan’s annual economic output. This distorts the market for government securities. Already holds the central bank one-third of outstanding government debt.

The Central Bank is desperately trying to stimulate inflationary pressures

The easing of monetary policy is considered the first package of measures of the three-piece abenomics , the program to stimulate the Japanese economy, named after Prime Minister Shinzo Abe. Because the home side’s central bank, to cheer and to weaken the yen, the stock market, the monetary policy has so far been the only success of abenomics.

However, central bank governor Kuroda is from his goal to provoke two percent inflation, still almost as far away as when he took office three years ago. The latest move of the Central Bank show that they stick with their attempt to generate inflation in difficulties, the business newspaper commented Nikkei . For more than three years makes central bankers Kuroda although gentle but stubborn deflation for the stagnation of the Japanese economy responsible, holding for almost 25 years.

The young and the old missing money to spend

Now, he shifted the inflation target one more time on summer 2017. Kuroda believes an alleged deflation expectation vera let consumers and investors, purchases and investments postpone because they would indeed cheaper.

He forgets that a Much of the Japanese, especially the young, have no extra money because of poor salaries, which they could spend. The elderly, many of whom sit on savings, fear the future, because Premier Abe has cut pensions -. And because they receive on their bank deposits for many years, no interest, so subjectively be steadily poorer

As long as the wages and pensions will not rise significantly in Japan, the economy is hardly healthy. Because it is driven to two-thirds of consumption. However, the forecasts for the wage freeze in the spring do not indicate any significant increases. At the same time most entrepreneurs see themselves no reason to invest in Japan. The country is considered to be over-regulated, shrinking market.

Still, central bankers can Kuroda no criticism of his dogma apply when Japan only succeed to break the deflationary expectations, will attract business. The decision for negative interest rates fell in the monetary policy advice the Bank of Japan with five votes to four very concise. Nevertheless Kuroda announced that the central bank will increase the negative interest rates if necessary even in a next round.


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