Japan's Debt Bomb Delayed Somewhat, As BOJ Targets 2% Inflation But Open-Ended Asset Purchase of 13 Trillion Yen (US$145 Billion) Per Month Delayed Till 2014

Financial and fiscal insanity has been the norm since September 2008. Japan is merely a lap or two behind, now frantically trying to catch down with the US Fed and the ECB in cheapening the currency and going full-speed on further fiscal profligacy.

Bank of Japan just announced the result of its two-day deliberation on monetary policy. It will officially target 2% inflation, and unlimited quantitative easing through asset purchase of whopping 13 trillion yen (145 billion US dollars, take that Helicopter Ben!) per month, but the latter won't start until January 2014.

Japan's Nikkei ended slightly down, at 10,709, in mild disappointment that the open-ended QE is not going to start right away.

A token independence of the central bank is gone, as the inflation target will be closely examined by the executive branch of the government every three months.

From Nikkei Shinbun (1/22/2013; part):

日銀は21～22日に開いた金融政策決定会合で、２％の物価安定目標を採用することを決めた。政府との間で「デフレ脱却と持続的な経済成長の実現のための政府・日本銀行の政策連携について」とする共同声明を作成。消費者物価の前年比上昇率で２％を目指すとともに、経済財政諮問会議で進捗状況を定期的に検証することなどを決めた。

Bank of Japan adopted the price stabilization target of 2% after the two-day meeting on monetary policy. A joint communique with the national government is to be drawn up regarding "the joint policy effort between the national government and Bank of Japan to move away from deflation and achieve sustainable economic growth". The target of 2% increase of year-over-year consumer price will be set, and the target will be periodically examined by the Council on Economic and Fiscal Policy [under the Cabinet Office].

２％の物価安定目標の導入とともに、資産買入基金で「期限を定めない資産買い入れ方式」の導入も決めた。新方式では2014年初から期限を定めず毎月13兆円の資産買い入れを実施する。買い入れの内訳は長期国債が２兆円、短期国債が10兆円。その他の資産は残高を維持するように買い入れる。この結果、基金の残高は14年中に10兆円程度増え、それ以降も残高を維持する見込みだ。基金の新方式については全員一致で決めた。

In addition to the introduction of price stabilization target of 2%, BOJ decided to introduce a new open-ended asset purchase program using the asset purchase fund. Under the new program, BOJ will purchase assets at 13 trillion yen [145 billion US dollars] per month for as long as necessary starting in the beginning of 2014. The assets will include 2 trillion yen long-term government bond, 10 trillion yen short-term government bills, and the rest of the assets [REIT, ETF, commercial papers, corporate bonds, etc.] will be purchased to maintain the existing balance. As the result, the balance of the asset purchase fund will grow by 10 trillion yen in 2014, and the balance will be maintained thereafter. BOJ decided on this new program by unanimous vote.

Interestingly, Nikkei English article does not mention monthly asset purchase of 13 trillion yen. Instead, it has a piece of information that is not in the Japanese version - that there were two people who dissented at the BOJ meeting over 2% inflation target:

The bank's policy board voted 7 versus 2 at the end of its two-day meeting to introduce the target, replacing its current 1% price "goal," which Mr. Abe had criticized as being too weak of a commitment by the BOJ.

I wonder who they were.

But to call the 2% inflation target as "price stabilization target", that's pure Newspeak. Japanese people will be lulled by the word "stabilization", without realizing it is the past 2 decades that have had excellent price stability.

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