With the exception of emerging market countries in trouble like Brazil and
Russia, and complete hyperinflation basket cases like Venezuela, can anyone
name a central bank that genuinely wants a stronger currency?
Today, the Bank of Japan is at the top of the whiner list of strong
currency complainers, despite the obvious mathematics.
Bank of Japan Governor Haruhiko Kuroda warns Current Yen Strength Risks Harming Japan Recovery“.
Speaking to reporters in Frankfurt Monday, Kuroda also reiterated that BOJ
policy makers won’t hesitate to expand monetary stimulus in order to achieve
their 2 percent inflation target. The central bank’s board left settings
unchanged at a meeting Thursday, spurring a nearly 5 percent, two-day surge
in the yen against the dollar.
“There is a risk that the yen’s current appreciation brings an unwelcome
impact on the economy,” Kuroda said on the sidelines of an annual gathering
of finance chiefs from members of the Asian Development Bank, which he used
to lead. “We will be closely monitoring the impact of financial markets on
the real economy and prices.”
The yen has climbed 13 percent against the dollar this year, the best
performance among its developed-market peers. It reached an 18-month high of
106.05 per greenback and was at 106.13 as of 8:32 a.m. in Singapore.
Japan’s economy is at risk of sliding into its second recession in two
years after contracting in the final three months of 2015, while inflation
remains far from the BOJ’s target. One gauge showed consumer prices retreated
at an annual 0.3 percent pace in March, the biggest decline since April 2013,
the month that Kuroda initiated his stimulus program.
Yen Perspective
Between January 2012 and May 2015, the Yen declined a massive 39.43%
against the US dollar.
What more did Bank of Japan Governor Haruhiko Kuroda expect?
Mathematical Idiocy
It is mathematically impossible for every country to simultaneously
devalue their currencies vs. every other currency.
Yet, the Bank of Japan, the ECB, and the Fed all want to do just that.
Moreover, the belief that inflation generates growth is absurd in and of
itself.
Yet, here we are.
Amusingly, one of the ways Japan seeks to increase inflation is an
“outing” process of corporations that do not raise wages.
For my rebuttal, please consider Is Anemic Wage Growth Stifling the Economy?
Mish Solution
Yet, I am willing to go way out of my way for central bankers to get what
they want. I repeat my sure fire solution for Japan to get the inflation it
seeks.
I propose negative sales taxes!
For details please see Mish’s Sure Fire Proposal to End Japanese Deflation: Negative
Sales Taxes, 1% Monthly Tax on Gov’t Bonds.
Mike “Mish” Shedlock
