Japan’s central bank just reported it is “out of ammo” referring to QE

The two lions symbolic of the BoJ's Bank of England central banking model

The two lions symbolic of the BoJ’s Bank of England central banking model

Under the current model of central banking Japan’s central bank has been printing money (Quantitative Easing) since 2001 without any real manufacturing taking place continuing to inject all this money into the system. Japan’s central bank head, Haruhiko Kuroda has come out and stated “the BoJ is out of ammo.” With all the QE going on by Japan’s central bank that cash has largely gone into Japan’s military-industrial complex by purchasing corporate debt because there is no real demand for manufacturing in other sectors of the economy. QE can’t force people to buy shit they don’t need or want. But that is what the Japanese government through its central bank monetary policy are trying to force: consumption. The outcome of this are preparations for war which is why there is constant tension between Japan and China. This might explain Japan’s military buildup currently taking place where in Kobe, Japan Kawasaki Heavy Industries and Mitsubishi Heavy Industries Ltd. continue manufacturing three more Sōryū-class attack submarines for a total of 11 of the Sōryū-class submarine. Japan will also be building 13 submarines for Australia. What does the country of Australia need 13 attack submarines for? This is the central bank model: military hardware to stimulate economic growth under QE. With Japan’s population decreasing and less automobiles and motorcycles being sold in Japan, where else is Japan going to spend all that QE liquidity? The only viable market is for Japan to begin exporting weapons and munition systems to an international market.

Source: Zero Hedge

Did Japan Just Prove That Central Bankers Are Effectively Out of Ammo?

Phoenix Capital Research’s picture

Submitted by Phoenix Capital Research on 01/25/2016 14:02 -0500

Abenomics Bank of Japan Bond Federal Reserve Japan Market Crash Nikkei Recession

The world has yet to fully digest what is currently happening in Japan.

Japan is the global leader for Keynesian Central Banking insanity. The ECB and US Federal Reserve began implementing ZIRP and QE after 2008. The Bank of Japan has been employing both ZIRP and QE since 2001.

Put simply, by the time the Great Crisis of 2008 rolled around, the Bank of Japan had nearly a decade’s experience seeing what QE, ZIRP, and the like could accomplish.

On top of this, the Bank of Japan has been the single most aggressive Central Bank post-2008. In 2013, it launched a single QE program equal to roughly 25% of Japan’s GDP (the Fed’s largest program was less than 10% of GDP).

As if this wasn’t insane enough, the Bank of Japan then expanded the program, not because it was working, but because doing so would result in its models appearing more accurate.

In short, the Bank of Japan crossed the Rubicon long ago as far as monetary insanity goes.

Which is why it’s critical to note two things:

1) The Head of the Bank of Japan, Haruhiko Kuroda has admitted Japan’s “potential” GDP growth is 0.5% or less.

2) The Bank of Japan just boosted its ETF purchases but not its bond purchases in response to Japan re-entering a recession.

Regarding #1, this is an implicit admission that QE doesn’t generate GDP growth. Anyone who’s studied QE knew this already, but it’s an incredible admission from a Central Banker. These are the people responsible for instilling confidence in the system.

Which brings us to #2.

The illusion that QE is anything other than a market prop is over. The BoJ has admitted QE doesn’t generate economic growth. This is confirmed by the fact that it only boosted the stock related component of its current QE program, NOT the bond-buying component.

Mind you, this is AFTER Japan entered a recession, which only gives credence to Kuroda’s admission that QE cannot generate GDP growth.

However, the big news is that despite the boost in ETF purchases, Japan’s Nikkei has collapsed, taking out the bull market trendline running back to the first hint of Abenomics back in late-2012.

Zero HedgeIn short, not only has the Bank of Japan admitted QE is not a successful tool for boosting GDP, but we’ve reached the point at which even increases in QE are no longer having the desired effect

The markets have yet to digest this, but when they do, it’s going to be one heck of a show.

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Best Regards

Graham Summers
Chief Market Strategist
Phoenix Capital Research


4 thoughts on “Japan’s central bank just reported it is “out of ammo” referring to QE

  1. Japan military spending has not really increased significantly since about 1990. In 2015 about 2.0% and in 2016 1.5%. It is flat and it is dwarfed by China and the US.

    • Then take into consideration compared to most other countries Japan’s military expenditure for 2016 at ¥5.05 trillion ($41.8 billion). That’s half of Russia’s military expenditure.

      And I think that ¥5.05 trillion is being redirected.

  2. Russia is broke. If they had money they would spend it on guns. The US is over 10x Japan and China is about 3x. Are you saying that Japan is militarizing because they are spending 1.5% more than last year on an army that is 1/3 the size of China, 1/2 size of Russia and 1/10 the size of the US?

    • Lot’s of speculation on Russia. I don’t accept most news media reports from “western” sources on Russia, not when Russia’s gold holdings are over 40 metric tons and continues to purchase gold (although that’s just what is actually reported) and hold’s the world’s largest oil and natural gas deposits despite the dropping oil prices.

      What I am suggesting is Japan is redirecting its military expenditure.

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