Kuroda Comedy Hour (Or Has The World Gone Mad… Again?)

The head of Japan's Central Bank kept a straight face while unleashing a torrent of comedic genius this evening with regard the Japanese economy and its monetary and fiscal policy success… Enjoy…

*KURODA: EXPECT JAPAN TO CONTINUE MODERATE RECOVERY (let's hope not….)

*KURODA: INFLATION EXPECTATIONS RISING ON THE WHOLE (nope…!)

*KURODA: BOJ EASING HAVING INTENDED IMPACT (Misery Index at all-time record highs)

Then this…

*KURODA: BOJ ISN'T TRYING TO CAUSE NEGATIVE RATES (ok great…)

Followed by this….

*KURODA: BOJ TRYING TO USE EASING TO LOWER YIELDS OVERALL (wait what, you just said… oh forget it)

And then..

*KURODA: NEGATIVE RATES IN MARKET REFLECT BOJ'S STRONG EASING (the strong easing that is not trying to cause negative rates but is trying to lower yields, right?)

Seriously!!

*KURODA: WEAK YEN HAS BEEN PLUS FOR JAPAN'S ECONOMY (oh you mean apart from the now record chronic trade deficit?)

On the terrible missing J-Curve (via Patrick Barron of the Ludwig von Mises Institute of Canada):

Perhaps I can shed some light on Japanese Prime Minister Abe’s missing J-curve; i.e., why Japan’s trade deficit seems to be increasing rather than decreasing after massive monetary intervention to reduce the purchasing power of the yen. Monetary debasement does NOT result in an economic recovery, because no nation can force another to pay for its recovery.

Monetary debasement transfers wealth within an economy by subsidizing exports at the expense of the entire economy, but this effect is delayed as the new money works it way from first receivers of the new money to later receivers. The BOJ gives more yen to buyers using dollars, euros, and other currencies, as the article states, but this is nothing more than a gift to foreigners that is funneled through exporters. Because exporters are the first receivers of the new money, they buy resources at existing prices and make large profits. As most have noted, exporters have seen a surge in their share prices, but this is exactly what one should expect when government taxes all to give to the few.

Eventually the monetary debasement raises all costs and this initial benefit to exporters vanishes. Then the country is left with a depleted capital base and a higher price level. What a great policy!

The good news is that Japan does know how to rebuild its economy. It did it the old-fashioned way seventy years ago–hard work and savings.