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Japan to inflate its way out of deflation

Without the background we have gained in understanding of things economic, this article would have gone by unnoticed.

Forbes: Forget Cyprus, Japan Is The Real Crisis

Forget Cyprus. A much bigger story in the coming weeks and months will be in Japan, where one of the greatest economic experiments in the modern era is about to begin. A country where government debt even dwarfs those of Europe’s crisis-ridden nations, Japan will attempt to inflate its way out of a 23-year deflationary spiral.

The overwhelming consensus among the world’s economists is that quantitative easing (QE) has saved the day in the U.S. and that Japan needs to follow suit, on a larger scale. I beg to differ and suggest this policy will almost certainly lead to a hyperinflationary disaster in Japan. If that’s right, it will have serious ramifications for other countries, dragged down by an acceleration of the so-called currency wars. More broadly though, it is likely to destroy the myth pushed by today’s economists that QE is a cure-all for downtrodden economies. It isn’t and Japan will become the template to prove it.

Monster stimulus on the way

The new Bank of Japan (BoJ) Governor, Haruhiko Kuroda, started work on Thursday and his first day on the job disappointed investors. At a press conference, Kuroda pledged to do whatever it takes to defeat deflation and reiterated the government’s target of 2% inflation. But he provided little in the way of specifics and investors promptly bought the yen and sold stocks.

Continue at Forbes

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Thanks RP




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Thanks for post

Well, guess economic fascism is not all that it is cracked up to be.

Don't get me wrong Japan makes some great autos and machinery and the people as a whole are great too, it is unfortunate they mix government and business.

donvino

So where do you put your yen

So where do you put your yen savings ?

I'm not generating much

in the way of savings these days so it's not much of an issue
personally. Japanese people tend to keep a lot of cash on
hand (the older ones, anyway) and have their savings in
the postal banking system or generic bank accounts.

I imagine the wealthier ones have assets offshore, precious
metals and such but everyday Japanese don't seem to be
interested or active purchasers of gold, etc.

Personally, tangible stuff like tools, land, silver and other metals, SHTF
gear and that sort of thing look like the way to go - what surpluses I do
manage tend to go to stuff like that.

True story:

Talking to a Japanese woman(60's) about the possibility of inflation
and whether buying gold or silver would be a worthwhile
investment/hedge. She tells me she invested in a dollar-
denominated fund through her bank and had lost money.
She was still in the fund so I asked why she stayed in. Basically,
she thought it was better to stay in and hopefully somehow make up
the loss. Asked why she didn't buy gold or silver she said
it didn't seem safe...

Article calls it pretty accurately

I live in Japan and attempt to discuss this with students, friends & etc.
Most of them see the indebtedness as an general sort of threat, but
not all that immediate of one. As the article says though, high
inflation is very likely - a kind of stagflation, most likely.

Almost no one here has any actual experience of living in an
inflationary environment - there was a fairly short period of
high inflation right after WWII, but nothing much since - although
it is starting to crop up now. But most people still have a
strong (and highly misplaced) faith in the value of the fiat
currency.

Devaluing the currency was something of an option to stimulate
the economy when the export sector was bigger and imports
were lower. Now, a lot of manufacturing has gone offshore - or
just gone - and soybeans, wheat, corn, oil, gas and coal are 90%
plus imported. So exports may crank up some, and benefit certain
companies and regions of the country, but inflation will
be pervasive.

There are constructive things Japan could be doing - such as
promoting immigration, but there is no political will to do it.
And no will to really eliminate the vast amount of waste in
government either, so the default course seems to be inflation/default.
Nothing significant will change till they finally hit a wall,
the wheels fall off or whatever.

And the right wing nationalist thugs are waiting, no doubt, to
step in and try to re-establish outright control when the inevitable
train wreck occurs.