Japan's Great Economic Experiment Starts In Just A Few Hours — Here's What You Need To Know

TBI ^ | 4-3-2013 | Matthew Boesler

[blam]

This is it – the moment the Abenomics-watchers have been waiting for.

Wednesday night, the Bank of Japan will conclude its first monetary policy meeting with new BoJ Governor Haruhiko Kuroda at the helm.

So far, Japan's great "Abenomics" experiment – which seeks to employ bold policy tools to overcome more than a decade of deflation – has been mostly talk.

Now, the rubber meets the road for Kuroda, the monetary policy dove selected by recently-elected Japanese Prime Minister Shinzo Abe to lead the charge from the BoJ, which has to do a lot of the heavy lifting.

There are a few things everyone is looking for, according to analysts at Morgan Stanley, BofA Merrill Lynch, and Deutsche Bank – an increase in the size of the Bank of Japan's quantitative easing program, a directive to start buying longer-dated bonds as part of those asset purchases, a cut in the interest rate the central bank pays on excess reserves, and stepped-up purchases of risk assets like ETFs.

Below is what BAML analysts Shogo Fujita, Masayuki Kichikawa and Shuichi Ohsaki predict for Kuroda's meeting.

Announcement of early introduction of an open-ended framework (FY13).

A suggestion of a forward-guidance framework. (such as “easing to continue until a 2% inflation target is feasibly attainable”)

Announcement of elimination of the banknote rule and unification of JGB purchases through the APP and rinban operations. (We expect the APP will be maintained for risk assets, integration will depend on the construction of procedural systems i.e. will not be immediate)

Extension of the central JGB purchasing zone to longer maturities (with the shift to full rinban this is fully expected

(snip)

[Ditto]

Oh, Yes, I remember...I worked at Intel at the time...KANBAN...

The KANBAN actually works pretty well especially today when you can track order status on-line all the way through to supply chain. Our company didn't do manufacturing on the same scale as Inetl, but the just-in-time process did save us lots of money on inventory costs.

The one Japanese inport from those years that IMHO just didn't translate well into 'American' was the Quality Circles. We used to call them what they were... Circle Jerks. I never saw even one productivity improvement come out of any of them.

[goodnesswins]

Interesting about kanban....and YES! I do remember QC’s....

[Rio]

In other words, they’re going to try and inflate and bailout their way to a booming economy.

Because that always works!

[Teacher317]

Yeah, because 1-day changes in the market are always the perfect indicators of how economic decisions will affect the economy long-term... and can NEVER be manipulated, either...

The BOJ is going to buy $900 Billion in long-term government bonds over the course of a year, to try to grow of the monetary base by $600-750 Billion annually... and this is the "perfect" answer to Japan's hyper-spending problems. Mm hmm.

(Japan's total debt is over 200% of their GDP. The IMF calls anything over 125% "unsustainable". The US jumped from ~40% under Bush to 105% under Obama. We are now #11 in the world, having just passed the Sudan in this illustrious ranking. Japan is #1, Zimbabwe, Greece, Italy, Ireland, and a few Caribbean island nations are the only ones left ahead of us.)