Japanese Central Bank Throws Away a Billion Dollars Again

This morning when I woke up I checked the financial markets, gold, silver and, of course, the dollar yen rate.


I was somewhat surprised to see the yen at ¥76.9-something to the US dollar. A hour or two later, the yen had dropped to its current ¥78.9 per US dollar. Obviously the Japanese Central Bank intervened and bought a bunch of dollars.


Fools. When will they ever learn? They keep throwing our hard earned tax money down the drain to stop the yen's rise, but it is all in vain as the yen's appreciation continues. 


Market Watch reports:


Japanese Finance Minister Yoshihiko Noda confirmed the government acted alone to curtail the yen’s rise, unlike in March, when local authorities acted in concert with their counterparts from the Group of Seven leading economies to keep the yen 
from appreciating further.


Why do these fools keep doing this? When will they ever learn that these interventions cannot and will not stop any long term trend? The next part of the article is laughable:

Still, many analysts were skeptical that the actions could keep the yen anchored beyond the short term.

“We don’t believe today’s action will explicitly change the trend of the [dollar-yen rate],” economists at The Royal Bank of Scotland wrote in a note to clients.

“As long as concerns for the downside risks in the U.S. economy and expectations for the [Federal Reserve’s] further easing measure persist, it is hard to expect the [dollar’s rate against the yen] to return to high enough levels to alleviate the negative pressure on exporters’ earnings,” they said.

Gee, you think that, after decades of this sort of failed action repeated over and over that these analysts would figure it out? Gee... I guess they really go out on a limb and stick their necks out when they make statements like, "We don't believe today's action will explicity change the trend." 

What!? After decades of this sort of action and the inevitable failures of those actions, why is it  difficult to say straight out that "this Bank of Japan intervention will fail like all the others have before it."

There I said it. Am I an economic hero or what?

Idiot Japanese Politicians and Video as to What to do About Them

Hate to sound like a broken record, but here is more information that the government and Bank of Japan are going to repeat past mistakes and throw public money down the toilet again by buying bonds.

I've written before about this idiocy.

As Albert Einstein said, "The definition of insanity is to repeat an action yet expect a different result every time."

Breitbart reports:

The Bank of Japan is considering additional government bond purchases by the end of this year as part of a "comprehensive monetary easing policy" it adopted in early October, sources familiar with the matter said Friday.

The possible launch of additional bond purchases will be taken up at the central bank's policy board meeting next Thursday, the sources said.

On May 5, the BOJ Policy Board decided to buy 3.5 trillion yen in long-term government bonds and short-term government securities over a one-year period in order to prop up economic activity by steering one- to two-year interest rates lower.

The purchase plan will be implemented aside from the BOJ's annual purchase of 21.6 trillion yen worth of government bonds.

The plan is part of a fund the BOJ decided to establish in the amount of 5 trillion yen to buy assets which also include commercial paper, exchange-trade funds and real investment trusts.

The BOJ, which will buy ETFs and REITs for the first time, is studying purchases through trust banks, the sources said. Subject to government approval, the purchase of them is likely to begin after the additional acquisition of government bonds.

Here is a video that I've found that shows what my choice is as to what to do about these idiot politicians who keep repeating the same mistakes over and over. Watch the video and see if you agree.



Come to think of it. I reckon this is an excellent solution to any big government tax and spend politician.

Bank of Japan and Japanese Government Becomes a Laughing Stock. The People Pay...

Friday, the yen hit a 15-year high to the chagrin of the Bank of Japan and the fools who "govern" this country. This, just three weeks after massive Bank of Japan currency intervention on Sept. 15.

As Reuters reported:

The U.S. dollar slid to a 15-year low versus the yen on Friday after a weak U.S. jobs report while Wall Street edged up on speculation of more Federal Reserve economic stimulus as policymakers in Washington seek to avoid a currency war.

Just up to a few days ago, the Bank of Japan was patting itself on the back that they went to the G7 and, since no one complained about the big currency intervention on Sept. 15, that Japan was ready to do it again.

The Market Watch reports:

"I explained to the G-7 that Japan's previous intervention was aimed at curbing excessive appreciation in the yen that could hurt the Japanese economy," Yoshihiko Noda said at his first press conference since returning from a meeting of finance ministers and central bank officials of the Group of Seven industrialized nations.

......Japan’s Finance Minister Yoshihiko Noda said at his first press conference since returning from the weekend’s Group of Seven nations’ meeting of finance ministers and central bank officials that Japan would take “decisive” action if necessary, including currency market intervention, to stem the yen’s rise.

Now he should say, "Since the currency intervention was a miserable failure, I look like a total buffoon, with the rest of these morons in power. But I don't care since we are spending other people's money..." But, alas, he won't. 


Noda and the rest of these idiots don't realize what the average guy on the street understands: Currency intervention doesn't work - especially if it's just one country doing it (see here) and the reason why no one complained about it at the G7 meeting was that the other participants thought it (and the Bank of Japan) are a big joke.

You'd think that these morons in the government would learn their lesson and stop repeating the same asinine mistakes or, at least, keep their mouths shut. But no... 

ABC News reports: 

Noda's reiteration of Japan's currency stance highlighted the risk of another round of intervention to weaken the yen after Japan weathered a flurry of weekend Group of Seven and IMF meetings with no overt criticism of last month's yen selling -- its first in six years. 

Now why in the world would this idiot finance minister Yoshiko Noda telegraph Japan's next moves again when they just complained that China bought billion of dollars of Japanese bonds yet Japan is unable to buy Chinese Bonds or currency? 

In spite of being a totally incompetent and typical run-of-the-mill old-school politician himself with no new answers to anything, former Prime Minister Taro Aso was right about one thing: The DJP is run by a bunch of in-experienced incompetents who will run Japan into the ground.


Some of my regular readers might think I am being too harsh (again) but I do not exaggerate when I say this has become a such a disgusting farce and that the entire world thinks the Japanese government and Bank of Japan are a complete and totally clueless group of morons.


Rick Ackerman can back me up on what money commentators on the other side of the Pacific Ocean think about this:


 "...That was the day the Bank of Japan intervened in the currency markets for the first time in six years, prompted by concerns that the yen’s steep rise would hurt Japan’s export-based economy, and by the fact that the yen had recently spiked to a 15-year high versus the dollar. 


The intervention obviously failed, since the yen quickly recouped the loss and is now trading significantly higher than before the intervention.  Because we have heard little from the Japanese since, however, we can only infer that they know enough to shut up rather than pretend they can bully speculators. Repeat a threat often enough, and eventually you become a laughing stock."

The only thing Ackerman gets wrong is that he doesn't realize just how really out of touch with reality and messed up the Japanese government is... Heck, I guess I don't blame him. You'd have to live here and be here everyday to see it with your own eyes to believe it.


Hell, I've lived here for almost 30 years and I find this hard to believe.


The farce gets even wilder by the day as it is learned that China bought yen and might be "playing" with Japan and her economy.

As the Wall Street Journal reports:

Diplomatic tensions rose this past week after a Chinese fishing vessel bumped into Japanese patrol boats near East China Sea Islands claimed by both.

Mr Noda pledged to bring to the Chinese leadership his frustration over China's heavily managed capital account, which restricts foreign buying of local-currency securities.

“While China can buy Japanese bonds, Japan can't buy Chinese government bonds using its foreign reserves. I feel that's unnatural,” Mr Noda said.

Incredibly, even with screw-up after screw-up the Japanese government repeats the same mistakes...

Mr Noda's more strident rhetoric did little to convince investors that Japan has the firepower to stop the yen's ascent.

“The market is fed up with warnings,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management.

It is written that the Albert Einstein said that the definition of insanity is: 


"...doing the same thing over and over again and expecting different results. "


Like I blogged before.... With the same old tried and true failed methods being tried again and again, expect Japan to keep slipping down the slope to head towards an economy that will look like the Philippines.  I wrote about that here in "Japanese Government Continues to Destroy the Economy" and here in "Twenty Lost Years About to Become Thirty"... 


I suppose we shouldn't expect anything but incompetency from the Japanese government though... LDP or DJP... But what do these politicians care? They don't have to pay. It is the average Japanese who has to pay the piper for decades of mismanagement.


We can see the results of these policies everyday with just a walk into town. Does this really anger me? Yes. It should make every person every person living in this country who is not in dementia furious.

More From Mish Shedlock

Folks, I'm sick and in bed, but I thought you'd enjoy this by Mish Shedlock:

Japanese Politicians fed up with Deflation, Challenge BOJ Independence

Things are simmering once again in Japan. The Yen is approaching all-time highs and Japanese politicians have had enough of deflation. Another round of quantitative easing is now on the front burner.

MarketWatch reports Bank of Japan may buy asset-backed paper

Japan's central bank may announce plans to buy asset-backed securities when it issues its policy decision later Tuesday, the Nikkei business daily reported. The newspaper had reported earlier in the week that the Bank of Japan may expand its low-interest loans to financial institutions. But in the report Tuesday, the Nikkei said "a growing number of board members argue that the bank should go further" and begin buying securities backed by loans to small and medium-sized enterprises. The report, which didn't cite sources, said such a move would be aimed at making more funds available to the private sector.

BOJ Independence Under Attack 

Bloomberg reports BOJ Independence Challenged as Deflation Continues

Increasing risks to Japan’s recovery prompted what may become the biggest threat yet to the Bank of Japan’s independence as politicians seek to redress its failure to end the deflation entrenched in the economy since 1998.

Your Party, an opposition group, plans to submit a bill in the Diet session running through December that would give the government a greater role in BOJ policymaking. Ichiro Ozawa, a former challenger to Prime Minister Naoto Kan whose calls for currency intervention and enlarged fiscal stimulus have been adopted by Kan, made a similar proposal last month.

The debate comes after BOJ Governor Masaaki Shirakawa refused to expand purchases of government bonds this year even as deflation persisted. The bank may today instead widen a 30 trillion yen ($358 billion) program providing loans to banks, according to 14 of 17 economists surveyed by Bloomberg News. The effort has so far failed to stanch a contraction in lending.

Shirakawa’s intransigence has incurred the ire of politicians pressing the bank to boost efforts to end deflation, which erodes corporate profits, makes debt harder to pay back, and enhances the yen’s lure by lifting its purchasing power. The GDP deflator, a gauge of prices across the economy, has fallen 14 percent since 1997, according to data compiled by Bloomberg.

“Japan is the only industrialized country which has had consumer price changes of minus or zero over the past decade,” Keiichiro Asao, head of policy research at Your Party, said in an Oct. 1 interview in Tokyo. “If the central bank is a guardian of stable prices, it shouldn’t allow price declines.”

The BOJ, which has kept its benchmark interest rate at 0.1 percent since December 2008, currently purchases 1.8 trillion a month of government bonds. At the current pace of buying, the bank’s self-imposed ceiling for bond holdings will be reached in 2014, according to Barclays Capital estimates.

The Federal Reserve, by contrast, has eschewed any such ceiling and indicated last month it’s prepared to add to its holdings of U.S. Treasuries. At the same time, the Fed’s balance sheet, at $2.3 trillion, is smaller than Japan’s relative to the size of the economy, at about 16 percent, according to data compiled by Bloomberg. The BOJ holds about $1.5 trillion, or about 26 percent of Japan’s GDP.

Bank Balance Sheets Compared

ZeroHedge Asks Is The BOJ Preparing An Imminent Announcement Of Its Own Latest (And Certainly Not Greatest) QE?

The BOJ's balance sheet, which has been relatively flat when compared to peer central banks, especially since FX interventions will likely be sterilized, is about to explode and the JPY will plunge once the carry traders reorient themselves to shorting the original carry currency of choice.

As a reminder, here is how Japan has demonstrated remarkable restraint (at least recently) as everyone else has been printing.



In other words, the BOJ will continue to use FX intervention as an acute weapon every time the USDJPY drops below 83, and gradually implement asset-backed purchases as the chronic intervention against endless deflation.

Because this time it will be different. And, because, as the G-7 people promised, and everyone believed them, there will be no competitive devalution. Ever.

Politicians Know This Time is Different!
It's hard not to laugh out loud at the sarcasm in the last paragraph above.

Not only did QE fail to do what the Bank of Japan wanted (raise prices), QE has also failed to stimulate bank lending as Bernanke wants. Moreover, Japan's currency intervention efforts have not accomplished anything, ever.

But yeah... this time is different, because .... politicians know better!

By the way, this exercise in stupidity by all the central banks in question, shows just how hard it is to destroy a currency, even when you try (except against gold of course).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com