“No Limit to Monetary Easing” Says Bank of Japan

Economists debate limits of monetary easing, especially negative interest rates that prompt savers and even banks in Germany to stockpile cash in safes and bank vault. Bank of Japan chief Haruhiko Kuroda sees things differently.

Please consider Bank of Japan Vows to Keep Easing Monetary Policy.

Haruhiko Kuroda has vowed to keep easing monetary policy until inflation reaches 2 per cent, in a defiant speech dismissing the Bank of Japan’s critics.

Mr Kuroda, governor of the BoJ since 2013, claimed the central bank’s policies “have contributed significantly to the positive turnround in Japan’s economy” and said there was no chance of reducing the level of monetary accommodation.

His remarks pave the way for further easing in September, including the possibility of cutting interest rates from the current minus 0.1 per cent. They will eliminate market speculation that the BoJ could back away from aggressive policy.

“It is often argued that there is a limit to monetary easing but I do not share such a view,” Mr Kuroda told an audience in Tokyo. He said there was ample room for the BoJ to buy more government bonds, to cut interest rates further, or to buy other assets such as corporate bonds, equity and real estate funds.

Moreover, “other new ideas should not be off the table”, he added. Analysts have suggested various new avenues for easing, such as a cap on the yield curve; BoJ purchases of foreign bonds; or buying other domestic assets such as local government debt.

“Needless to say, there is still ample space for further cuts in the negative interest rate,” Mr Kuroda says. “The Bank has a broad range of policy options. It will continue to choose the most appropriate policy actions among those options, depending on the situation for economic activity, prices and financial conditions.”

Just Do It

Please stop talking and do something: Buy it all. Buy everything. Announce a plan to buy every asset in the world.

Alternatively, Kuroda might with to try Mish’s Sure Fire Proposal to End Japanese Deflation: Negative Sales Taxes, 1% Monthly Tax on Gov’t Bonds.

Mike “Mish” Shedlock