Record Japanese stimulus coupled with negative rates yield produced no inflation, a flat stock market, a strengthening Yen, falling exports, and a slowdown in bank lending.
Running Out of Road
Bloomberg reports Never Has BOJ Done So Much for So Little Benefit.
Even after arranging a record stimulus program and reducing a key interest rate to less than zero, the central bank has failed to boost inflation to its goal of 2 percent. Stocks are little changed from where they were in October 2014 when Governor Haruhiko Kuroda expanded his package of asset purchases. Exports are declining. One measure of bank lending is at a 14-year high, though loan growth is slowing compared with a year ago. While most sovereign bond yields have turned negative, corporate borrowing costs are lagging behind.
"Japan might be starting to run out of road a bit on the monetary policy front," said Andrew Colquhoun, the head of sovereign rankings for the region at Fitch in Hong Kong. That "would tend to undercut one of the sources of support that the sovereign ratings have had."
"The BOJ is falling short of its 2 percent inflation goal, by measures that include and exclude energy costs. Inflation swaps also show investors expect consumer price increases to hold close to zero for the next decade."
Despite a decline in purchasing power in the Yen from January 2012 until mid-2015, Abenomics has failed to generate much consumer price inflation.
Since then, the Yen has strengthened by 12.65%.
Achieving Inflation is Child's Play
Mish's Four Pronged Proposal to End Japanese Deflation
- Negative Sales Taxes
- One Percent Tax, Per Month, on Government Bonds
- National Tax Free Lottery
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It's truly pathetic when you cannot destroy your own currency despite years of trying.