Intensifying Capital Flight by Japanese Residents as Revealed by Record Accumulation of Foreign Assets

When the BoJ’s arrow of Abenomics was launched I wrote: (bold added)

Mr. Kuroda’s “shock and awe” opening salvo will be channeled through a grand experiment of doubling of the monetary base in 2 years by aggressive asset purchases by the Bank of Japan mostly through bonds. Such aggressive policy is likely to stoke a massive yen carry trade, or a euphemism for capital flight…

However rapid diminution of the yen (-3.51% w-o-w, 11.11% y-t-d) will also mean that aside from asset bubbles, resident Japanese will likely seek shelter through foreign currencies in order to preserve their savings, thus, such policies entails greater risks of capital flight.

So instead of promoting investments and economic competitiveness, currency devaluation will lead to distortions in economic calculation, increased uncertainty, lesser investments and a lower standard of living.

Well, the capital flight dressed up as foreign investments as noted today by Nikkei Asia

Japanese households' foreign-currency-denominated holdings of stocks, bonds and other financial assets have reached an all-time high as ultralow domestic interest rates and a weak yen have driven investors to seek higher yields abroad…

The tally briefly topped 46 trillion yen ($383 billion) earlier this year, up 7 trillion yen from the end of 2013, estimates based on market activity show. Bank of Japan statistics put the previous high, reached in September 2007, at 45 trillion yen.

Investment trust holdings account for some 30 trillion yen of the total, with direct investments in foreign securities making up about 10 trillion yen and foreign-currency deposits about 6 trillion yen. More than half of the total is denominated in dollars.

Despite all the media's hosannas on Japan's booming stock market, has it been a wonder why Japan’s economy continues to stagnate as reflected on street level sentiment and even from recent economic data?   

The above represents evidence of why political redistribution, channeled through money manipulation, will not lead to real economic growth. As Austrian economist Patrick Barron rightly pointed out:

Monetary debasement does NOT result in an economic recovery, because no nation can force another to pay for its recovery.