Japan just crossed another hurdle in its
escape ahead by monetization of its debt in what can be called a show of
strength by the new Prime Minister, Shinto Abe, against Japan’s central
The Bank of Japan (BoJ),
for that matter, is the central bank having used the printing press the
longest, precisely since the bursting of the stock market and the real estate
bubbles of the early 1990’s. The Fed, the ECB and the BoE only started
using it with the 2008 crisis.
Since the bursting of this bubble, all the
different japanese governments have instigated
recovery plans, added to the budgetary deficits, and accumulated a public
debt that is now the most important of the developed world (220% of GDP). And
the BoJ is contributing by buying some of the State
bonds to finance the debt.
What are the results of this onerous policy ? None, because there is no growth to speak of.
Well, this is one more reason to continue and amplify this movement, says
Shinto Abe, the new Prime Minister! The BoJ, after
about ten « quantitative easing » plans, is not too willing to go
ahead, hence the show of strength by Abe. The BoJ
independence, guaranteed by its statutes, couldn’t resist. It’s a
show of strength, consecrated by a « common declaration » about
the objectives of the BoJ.
The new adversary has been designated : deflation. Prices only dropped by 0.2% in
2012, but that’ll be enough. The target of 2% inflation is proudly
written in the common declaration. Inflation is becoming a goal in itself ! And, for that goal, the BoJ
will keep its base rate at 0% and will buy more and more State bonds, without
any « temporal limits ».
So now the enemy is not the debt, the
budgetary deficit, or a drastic reduction of the balance of payments... no,
it’s deflation, largely imaginary, that is used as a pretext for more
Shinto Abe continues with a policy that
doesn’t work, with a recovery plan of 20,200 Billion yen (175B euros). Which will cause more budgetary deficits. Despite the
different governments, Japan keeps going ahead and is going full steam toward
a default or hyperinflation.