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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: NOW who wrote (2534)3/19/2004 6:42:48 PM
From: CalculatedRisk  Read Replies (1) of 116555
 
I think that part of the reason is that the BOJ is trying to inflate their own economy.

As everyone knows, Japan has been suffering deflation for over a decade. They have tried low interest rates. They have run significant deficits trying to stimulate the economy, including public works projects (cementing half the country with bridges to nowhere).

If they print more Yen, no one in Japan will take it. They are in a liquidity trap. So instead they print Yen, exchange the Yen for dollars (putting more Yen into circulation) and then buy US treasuries as security.

This works better than buying their own debt, since the current plan has the added benefits (from Japan's perspective) of helping with the exchange rate AND keeping the US interest rates low.

I think inflation is part of their strategy.
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