Last Friday the Statistics Bureau of the Japanese Ministry of Internal Affairs and Communication reported some more bad news for Prime Minister Abe and really Bank of Japan chief Kuroda. Month-over-month, the consumer price index was down again, leaving it 0.48% less in June 2016 than June 2015. This was the third consecutive month of increasingly negative year-over-year CPI estimates.
When QQE was first implement back in April 2013, its staff economists guessed that it would take two years to get Japan back to 2% inflation; the standard target for almost all the central banks in the ‘developed’ world. The point of QQE as apart from all prior QE’s, and there had been nine or ten before it depending on your definitions, was that it would be so big, powerful, and sustained that the ‘deflationary mindset’ that had, according to orthodox economists, gripped Japan for decades would be forced to surrender to this new monetary regime. Two years was their conservative forecast.
The Bank of Japan did achieve the first part; the central bank has, as of the latest balance sheet figures for June 2016, quadrupled the level of bank reserves in Japan. The end of month balance in March 2013 was 52.6 trillion, a number that at the outset of prior QE’s was already supposed to be impressive, further meaning that it wasn’t as if BoJ was starting from nothing. More than three years and an acceleration of QQE later, there are now 272.6 trillion of bank reserves in Japan, an increase of 418.2%.
This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ August 3, 2016.
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