Bank of Japan News:

 https://mainichi.jp/english/articles/20210105/p2g/00m/0bu/081000c

Article:

TOKYO (Kyodo) -- After a tumultuous 2020, hit by the coronavirus pandemic, the Bank of Japan appears eager to deflect criticism that prolonged monetary easing will do more harm than good and years of pumping money into the economy has done little to boost inflation.

The BOJ's 2 percent inflation goal remains elusive, and there are even fears that the economy will slip back into deflation, a view that Governor Haruhiko Kuroda dismisses.

A moment of reckoning awaits the BOJ in March, when economists will scrutinize the bank's planned disclosure of assessment findings on how to make its policy more effective and sustainable.

Ideas:

The ideas challenging the BOJ's strategies are logical and maybe understandable. But the at the same time, without the strategies that the BOJ has used where would the economy be?

Would the economy be in the same position without the strategies? Would be economy be worse off? 

Because there are so many variables involved in an economy, its not easy to determine exactly which strategy is best.

The BOJ and any one organization trying to find what is the best strategy to keep the economy going, to keep it from getting worse, and or to grow it more is sometimes nothing more than guesstimates as to what to do, meaning know one really knows what is exactly going to happen 6 months into the future.

Article:

The dilemma is that it needs to keep easy monetary policy much longer than previously anticipated while addressing its side effects, including aggressive asset buying that has made the bank the top holder of both government bonds and stocks. Low interest rates have hurt the profitability of financial institutions.

"What monetary easing under Mr. Kuroda has made clear is that injecting money (into the economy) has not caused prices to rise. It's about time to look back on the policy steps that have been deployed and make adjustments," said Yuichi Kodama, fellow chief economist at the Meiji Yasuda Research Institute.

The difficult task for the BOJ is to secure some wiggle room for maneuvering without giving the impression that it is weakening the degree of easing -- or moving toward policy normalization -- when the U.S. Federal Reserve and the European Central Bank are on course to keep their expansionary monetary policies, analysts say.

Ideas:

Of course its always good to review any policy or strategy to see how it is working or not working and is it achieving its intended goal.

What maybe should be understood is that a policy or strategy, should clearly "do no harm" and or as minimal as possible.

While a strategy might not 100 percent achieve what it was intended do to does not mean it was a bad strategy.

As again there are so many variables involved in an economy, its not easy to exactly determine what the exact weakness were that might have caused a strategy to not work exactly as planned.

So to say the the BOJ as failed in its attempt to increase inflation might not correct. But what might correct is we might say the BOJ strategy at least might have prevented the Japanese economy from slipping further into deflation.

Yes there are always positives and negatives to any strategy, but the attempt should be to try and keep the positives more than the negatives.

For example, low interest rate might be good for businesses and households, but not so good for financial institutions. In this case the BOJ has to weigh the positives and negatives are try to balance them as much as possible.

There will never be a perfect strategy, but the goal should be to balance out the positives and negatives as much as possible.

Article:

The BOJ is seen as having little room to ease further despite its pledge to take additional steps when needed. According to Kuroda, the bank will examine whether its operations and policy tools, including asset purchases, have worked as intended.

"It is necessary to be nimble in making effective responses when needed to counter possible changes in economic activity and prices, as well as financial conditions," Kuroda told a meeting of the Japan Business Federation, known as Keidanren, in late December.

A review of the central bank's buying of exchange-traded funds is seen as a likely scenario because it has helped buoy investor sentiment, but critics say the unusual practice for a central bank has distorted stock markets.

Ideas:

The Bank of Japan should be, as much as possible, as flexible as possible. It should be able, as needed to change policies and strategies to help the economy.

However, it always needs to be aware that too much change and or too fast or too slow is not good.

The BOJ needs to be aware, as most central banks are, that investors, stakeholders or whomever watch very carefully what a central banks says and does. And as such central banks are usually very cautious about what they say, because just one announcement or something similar can easily move stock markets in a positive or negatives manner.

As such market distortion can turn into a reality very quickly if some strategies are not looked at for all the potential negatives and positives.

Article:

Meiji Yasuda's Kodama said the BOJ would want to move toward reducing the amount it buys. Due to the pandemic, the bank has set a 12 trillion yen ($116 billion) annual pace as its upper limit for ETF purchases, while it also pledges to buy at a pace of 6 trillion yen a year "in principle."

"The onus is on the BOJ to consider how to present any change and communicate its intent. If economic conditions are not good, the BOJ can, for instance, remove the limit saying that it is part of further monetary easing. But you cannot use the explanation when the economy is recovering," Kodama said.

When Japan was hit by its initial wave of coronavirus cases and economic activity was depressed in the spring, the bank removed its cap on buying of Japanese government bonds after the actual amount purchased was much smaller than the limit of 80 trillion yen a year.

In recent months, Japan is struggling to cope with record numbers of infections that have increased uncertainty about the economic outlook despite a modest recovery expected by economists.

Ideas:

The BOJ, like all other central banks, has recognized that the usual policies and strategies to help and economy might not work as the pandemic as almost turned most economies in deep recessions and or near depressions.

As such central banks, like the BOJ, need to develop new ways to thinking to help the economy as much as possible. If that means doing things that might not have even been considered then its needs to do everything and anything that is needed, and throw out old and tired ideas, conventional ideas to help the economy.

The BOJ needs to have some bold moves over the next six months to help the economy, not only truly recover but to get back to some kind of normality and not a "new normal" as has been thrown around recently.

Article:

The BOJ's swollen balance sheet has stoked concerns about its massive asset holdings, which would have to be reduced in future.

The bank has gobbled up Japanese government bonds to keep borrowing costs low and stable under its "yield curve control" scheme and currently owns some 45 percent of the outstanding debt issued by the state.

As of the end of November, it owned ETFs worth about 45 trillion yen in market value, according to an estimate by Shingo Ide, chief equity strategist at the NLI Research Institute. That is roughly 7 percent of the market capitalization of firms listed on the First Section of the Tokyo Stock Exchange.

Ideas:

The ideas above maybe be warranted under normal economic conditions and or under normal recessions, but this is not a normal recession type situation and it might not improve much in the future. 

So worrying about how much asset or debt holding the BOJ has is probably not the best time for that thinking.

While the Japanese economy has shown signs of recovery here or there it is a long way back to normal.

To put on any brakes now and or reduce BOJ activities now could be more of a negative than a positive.

Conventional theory might be correct, in normal times, but these are not normal times, and as such, the BOJ needs to do whatever is needed or necessary in the current economic conditions.

Article:

The 225-issue Nikkei Stock Average ended 2020 at a 30-year high, drawing a sharp contrast with an economy still struggling to return to pre-pandemic levels.

"ETF programs are supporting stock markets at a time when they are flying too high and need a flexible approach," said Martin Schulz, chief policy economist at Fujitsu Ltd. He expects a difficult review on "almost all levels" for the BOJ, which has served as a "policy trendsetter."

As the Japanese economy has seen its inflation rate far below 2 percent for a long time, Schulz said the BOJ can be more effective in providing incentives for growth beyond the pandemic rather than simply aiming at an elusive goal.

Ideas:

For many reasons, stock markets seemed, in recent times, to act differently than what is really happening in the real economy. Sometimes its like stock markets are in "their own little world" compared the the real economy that is taking place at this time.

Some might say the stock market may actually be a "bubble", meaning stock prices are too high or "artificially" high for the realities of the real economy.

The BOJ has been trying to get the inflation rate to the 2 percent level for a very long time.

Maybe the idea that an economy needs to have a 2 percent inflation rate is not really needed.

Perhaps an inflation rate well below that is the natural rate for the Japanese economy and as such the BOJ should focus on more pressing needs to help the economy in the current situation.

Let the inflation rate, as much as possible, assume a natural course and focus on more important areas. 

Article:

Japan's core consumer price index, excluding volatile fresh food prices, dropped 0.9 percent in November from a year earlier, the biggest decline in a decade. According to the BOJ's forecasts, the index will rise 0.4 percent in fiscal 2021 and 0.7 percent in fiscal 2022, still a far cry from 2 percent.

Kuroda has clarified that the bank will not overhaul the current easing framework, under which it maintains short-term interest rates at minus 0.1 percent while guiding long-term rates around zero at present through Japanese government bond-buying. The "yield curve control" program was introduced in 2016 after a comprehensive policy review.

Ideas:

Again the BOJ should not concern itself, at the present time, with the changes in the core consumer price index, maybe make sure they remain within a certain level and not get too low or even too high. 

Perhaps the idea should be again, to let them drift in an natural way, and not be too concerned but focus on helping businesses survive the pandemic.

How much does a drop of 0.9 percent really affect a family or even a business? And how exactly can the BOJ predict a 0.4 rise and or a 0.7 percent rise in the future with so many variables that could inhibit growth.

The easing framework of course might be good for businesses and households but most likely not good for financial institutions. So the BOJ again needs to look at the positives and the negatives or the current strategies as to who is it benefitting the most.

Article:

"We do not expect drastic monetary easing that would impact rates or the yen in 2021, as long as private banks' lending standards improve and the currency is stable," said Daiju Aoki, regional chief investment officer for Japan at UBS Wealth Management.

"As part of its review of current policy measures, we think the BOJ will enhance its lending program further, targeting more corporate investment for economic transformation such as digitalization and green investment," Aoki said.

Ideas:

Again the BOJ needs to make sure which policies are working for the overall good of the economy, and measure the positives and negatives of its strategies.

And its good to look to the future and create new strategies for new industries and innovations that might take place.

But the far more important need is now, and helping business from going to, helping them to survive the current situation.

This is not the time to "let the market" decide which businesses will survive and which will die under normal market conditions.

As the Japanese economy, at the moment, is not under normal market conditions.