I hope you don't mind me being a little perverse, but...
3% inflation in the Japanese economy in order to guard against deflation.
Now how will they accomplish this? By printing Yen. But will it be enough? I can't see how. The yen must be weakened,
You must separate weakening the yen from inflationary consequences and weakening the yen from printing yen. In the past persistent inflation weakened the value of a country's output but only by undermining the will to work, not for some number swinging reason. In a demand regime like that which prevails in the US money growth in excess of productivity will eventually lead to inflation. Japan in the '70s was more like we are today than what Japan through rampant practice of free market capitalism is currently. Now, Japan is a supply oriented regime. Then Japan was demand oriented and so was vulnerable to the mechanism of fiat money causing both rational expectations for and material evidence of inflation. Now when Japan creates fiat money it doesn't cause inflation with its output depressing effect rather it causes an increase in output. This has the effect of causing the yen to rise. So the mechanism is inverse to what it was in the past and it is inverse to what Japanese monetary authority expect. This is a garden planted for disaster. They will pump to avoid deflation and the currency will continue to strengthen, so they will pump harder to get it down when they don't need any further stimulus.
In tandem with Japan's pumping and backing off would be FED's tightening and backing off. That should have been done last year but FED had superficial reasons based on their own unfound fears to pump. The result is the two are out of complementary synchronization. The FED continues to pump through the surreptitious RP free float mechanism. The result of FED largesse is more and more American demand for the things which cause Japan to deflate(revving neo-mercantilism) and so the BOJ has the nominal evidence to pursue pumping beyond what they are justified in doing. The result there will be monetary inflation. They will see it and say, "this is good and is a result of our attempts to skirt deflation". The problem is that they won't be able to get it down without entering the long road to interest rate hell which the FED is now actively following.
or the threat of weakening must exist, in order to convince the Japanese people to spend or consume, knowing that if they don't spend it,
You shouldn't be bunked by this humbug line of media made swill. If you think the Japanese won't spend like we do, then you have to be racist. That isn't the problem.
it will lose its value sitting in their bank accounts.
You can't apply board game economics to the way the world works. Very little money is sitting in banks. Literally. The issue is how the money flows go where they go and where they could go for economy.
Call it tough love, but that, I believe, is the only way to shock their economy to a sufficient extent that they come out of their lethargy.
If you were in Japan and saw the "bad times" there, you would have a hard time understanding what you're talking about. You have to get rid of media-ization. You've been "hipmotized". The media don't know anything about what is happening in the world. The proof is seen when you take a media claim and look at it a month later. It's garbage.
(and of course it would be great for easing inflation fears here)
Whatever "it" is, it would have no such effect. Inflation comes form the will to inflate. That issues from the largesse of the FED and grows on class warfare.
The Japanese economy just will not prosper properly if they continue to take measly incremental steps as they have been doing over the past decade. Industry and manufacturing will travel to neighboring countries where goods can be produced cheaper, leaving Japan a nation of semi-wealthy retirees with 12 trillion yen in savings, but with a bunch of unemployed youngsters having to compete with South Korea and Thailand for manufacturing work.
That sounds like a rather desirable outcome, I'd say. It's extremely fair and brings about the right proportion of creative incentive.
Btw, look for the Yen to weaken by the end of the year. It was announced yesterday that the Japanese Govt will be forced to issue $47 Billion (Y5,000Bn)
Au contraire, like I asserted above this will have the effect of causing the yen to rise even more. So we will see whether I am right or whether university professors, economists, bank officials worldwide, have it down or whether they're all a bunch a damn hacks.
(ps. You and a bunch of others on this thread are the best thinkers available in the world today. You've made many good posts) |
