5 ms·

All it took was quantitative easing since 2001 resulting in ownership of 40-50% of the entire japanese bond market (which isn't really a market any more because

All it took was quantitative easing since 2001 resulting in ownership of 40-50% of the entire japanese bond market (which isn't really a market any more because some days 0 transactions take place due to the complete hijacking of the BOJ & a guaranteed 0% yield) & 5-10% ownership of the entire japanese stock market. The BOJ is a top holder of many largest Japanese corporations shares outstanding which is kind of weird because the BOJ doesn't really have any money they just "create" it. Color me bearish if that kind of monetary extremism can't even get the Nikkei 225 near prior all time highs or any meaningful inflation. I guess they could buy every bond in existence both public & private plus take the stock holdings up to 30% of the entire float.. maybe that's what is needed? It kind of seems weird to trust any of the statistics on inflation, rates, economic prospects for the country with such an active price insensitive manipulator in the market place every day.

RobertoG 8y ago
Reading your comment, comes to mind that the case of Japan demonstrate that bond markets are not so essential after all and that "creation" of money doesn't necessarily generate inflation.
joefranklinsrs 8y ago
Well, you could say the same about China, where the Chinese government is a major stakeholder, directly or indirectly of all the state enterprises and some of the biggest individual companies. Alot of the purchases of foreign companies and technologies is done by the Chinese government. Also, China engaged in huge QE from 2008 to today, resulting in massive debt taking. At least the financial numbers coming out of Japan is reliable and transparent. Also, alot of soverign funds around the world considers Japanese Yen and Bonds one of the safest investments.
- pembrook 8y ago
  It's hard not to see Japanese bonds as safe when they yield pretty much 0%.
- sdljfslkjfdsj 8y ago
  We agree China is more toxic & japans central banking interventions are indeed transparent. Hell the economists in charge of the policy even seem proud of the strategy & convicted in its outcome even though they've been wrong since you were probably in junior high. Even today they still claim the policy is driving inflation toward some goal seeked objective. It isn't but that doesn't hold them back from saying it & keeping a forever bid in the market place. As for "safest" investments well.. ya. You get 0% & sometimes less than that & sometimes a few basis points more so if the yield to maturity is an indication of risk then sure its riskless. The trade is your capital is lent to a sovereign for ~0% for 10 years with guaranteed inflation decay (cost of carry) & it's possible a default could occur. The only way a default won't occur is by creating more bonds & currency to finance the old debt when a tiny yield is present. Pass, at least with my money. If I need a place to park other peoples money where I earn a maintenance fee (pensions, endowments, etc) doing so regardless of performance then OK I'll do that. That's a fine incentive structure as a fiduciary but structurally it's a guaranteed no upside & 100% downside no matter how unlikely the downside. I like my money too much for that. I don't like the heavy handed interventions in any country but Japan is without a doubt the most reckless & crazy of them all. They've been doing it the longest & in the last 10 years went from bat shit crazy to mach 3 with hair on fire. It may feel quite common to you but I assure you central banks creating money to buy gov't debt to finance interest on previously issued debt hasn't always been so common. It's not a sign of strength.
  - joefranklinsrs 8y ago
    > since you were probably in junior high. It's been a looooong time since I was in Junior High haha > I don't like the heavy handed interventions in any country but Japan is without a doubt the most reckless & crazy of them all. No doubt, Japan started the QE. Then US. Then EU. Then China. Dollar is the hegemony, so US is safe. China is in a very dangerous position and will likely fail. EU has similar economic size as US, and is aligned with US, so it should be safe. Jury is still out on Japan. We will be able to tell when deflation takes over the world economy.
    - sdljfslkjfdsj 8y ago

RobertoG 8y ago

Reading your comment, comes to mind that the case of Japan demonstrate that bond markets are not so essential after all and that "creation" of money doesn't necessarily generate inflation.

joefranklinsrs 8y ago

Well, you could say the same about China, where the Chinese government is a major stakeholder, directly or indirectly of all the state enterprises and some of the biggest individual companies. Alot of the purchases of foreign companies and technologies is done by the Chinese government. Also, China engaged in huge QE from 2008 to today, resulting in massive debt taking. At least the financial numbers coming out of Japan is reliable and transparent. Also, alot of soverign funds around the world considers Japanese Yen and Bonds one of the safest investments.

pembrook 8y ago
It's hard not to see Japanese bonds as safe when they yield pretty much 0%.
sdljfslkjfdsj 8y ago
We agree China is more toxic & japans central banking interventions are indeed transparent. Hell the economists in charge of the policy even seem proud of the strategy & convicted in its outcome even though they've been wrong since you were probably in junior high. Even today they still claim the policy is driving inflation toward some goal seeked objective. It isn't but that doesn't hold them back from saying it & keeping a forever bid in the market place. As for "safest" investments well.. ya. You get 0% & sometimes less than that & sometimes a few basis points more so if the yield to maturity is an indication of risk then sure its riskless. The trade is your capital is lent to a sovereign for ~0% for 10 years with guaranteed inflation decay (cost of carry) & it's possible a default could occur. The only way a default won't occur is by creating more bonds & currency to finance the old debt when a tiny yield is present. Pass, at least with my money. If I need a place to park other peoples money where I earn a maintenance fee (pensions, endowments, etc) doing so regardless of performance then OK I'll do that. That's a fine incentive structure as a fiduciary but structurally it's a guaranteed no upside & 100% downside no matter how unlikely the downside. I like my money too much for that. I don't like the heavy handed interventions in any country but Japan is without a doubt the most reckless & crazy of them all. They've been doing it the longest & in the last 10 years went from bat shit crazy to mach 3 with hair on fire. It may feel quite common to you but I assure you central banks creating money to buy gov't debt to finance interest on previously issued debt hasn't always been so common. It's not a sign of strength.
- joefranklinsrs 8y ago
  > since you were probably in junior high. It's been a looooong time since I was in Junior High haha > I don't like the heavy handed interventions in any country but Japan is without a doubt the most reckless & crazy of them all. No doubt, Japan started the QE. Then US. Then EU. Then China. Dollar is the hegemony, so US is safe. China is in a very dangerous position and will likely fail. EU has similar economic size as US, and is aligned with US, so it should be safe. Jury is still out on Japan. We will be able to tell when deflation takes over the world economy.
  - sdljfslkjfdsj 8y ago