Tuesday, February 12, 2013

Japan’s Economic Minister: We Will Print Money to Boost the Stock Market

Japan’s economic minister announced a target for their stock market.

From the Business Insider
it appears that the Japanese government is trying to talk up stock prices in the same way it's talking down the yen.

Take a look at what Japan's economy minister Akira Amari said on Saturday, via The Japan Times:

“It will be important to show our mettle and see the Nikkei reach the 13,000 mark by the end of the fiscal year (March 31),” Amari said in a speech...“We want to continue taking (new) steps to help stock prices rise” further, Amari stressed, referring to the core policies of the Liberal Democratic Party administration — the promotion of bold monetary easing, fiscal spending and greater private sector investment.

The 13,000 index target implies around 17 percent upside in February and March. The pace may sound ambitious, but then again, Japan is one of the hottest momentum trades in the world right now.


Well such announcement resonates with what I call as the Bernanke doctrine.

The following was written by incumbent US Federal Reserve Chairman Ben Bernanke when he was still in the academia. (I have posted this numerous times here)

There's no denying that a collapse in stock prices today would pose serious macroeconomic challenges for the United States. Consumer spending would slow, and the U.S. economy would become less of a magnet for foreign investors. Economic growth, which in any case has recently been at unsustainable levels, would decline somewhat. History proves, however, that a smart central bank can protect the economy and the financial sector from the nastier side effects of a stock market collapse.
In short, the de facto character of social policies today has been to inflate asset bubbles. A policy assimilated by global political authorities as embodied by Ben Bernanke’s theories.

Don’t forget that debasing of the currency or the yen in support of the stock market implies for a redistribution of resources from the main street or the real economy to stock market investors. 

Japan’s banking and insurance industry are said to be heavily exposed to the stock market (Takeo Hoshi and Anil K Kashyap 2004) 

Contradicting the supposed intent sold to the gullible public as promoting competitiveness, debasing the yen to boost the stock market seems more of a concealed form of redistribution scheme that benefits Japan’s version of Wall Street.

Yet at the end of the day, unsustainable bubbles will pop.

Again as I said last Sunday, policymakers hardly ever learn, which is why bubble cycles exist.

1 comment:

Zäune und Tore Hersteller said...

Dobrze powiedziane!