Quantitative Easing in Japan, how’d that work out?

Not so well.

TheĀ Greens and Labour want to do here. They say it will lower the currency so our exporters can compete.

Japan is an exporting nation, and the Bank of Japan just pumped 11 trillion yen into the market:

The New Zealand dollar fell against the yen after the Bank of Japan added to its monetary easing, though not enough to weaken its currency appreciably, while markets remain subdued in the wake of Sandy and ahead of US presidential elections.

The kiwi bought 65.32 yen from 65.45 yen at 5pm in Wellington yesterday. The local currency traded at 82.07 US cents from 82.01 cents.

The yen rose against most of its trading peers after the BOJ expanded its asset-purchase program by 11 trillion yen to 66 trillion yen, about meeting expectations.

The kiwi did not get much overnight direction from equity markets, typically correlated with the currency because they are both growth assets, as Wall Street remained closed as New York was buffeted by the superstorm.

“The BOJ stuck to the script, doing just enough to placate the government but no more,” says Mike Jones, currency strategist at Bank of New Zealand. The BOJ “continues to disappoint investors looking for a bazooka approach such as the Fed is using”.

So what happened…bugger all, and the Greens and their hangers on think this is the solution for New Zealand.

  • Gazzaw

    Have to disagree WO – with our giant economy and influential international banking system the NZD is bound to impact on the world economy where the JPY didn’t. Bear in mind also that our QE masterplan will be devised by financial icons Shearer & Norman, not by the Tokyo banking midgets.

  • David Broome

    Only a nut job would say let’s follow Japan and you are spot on WO. Japan’s public debt is 230% of GDP and is the largest in the OECD (that would be like NZ’s debt being $460 billion). Despite printing Yen its official cash rate is a jaw drop;ping 0.10% so like that has really worked. It has an aging population too. Printing money is the last chance saloon.

    • 2ndAmendment

      In actual fact, Japan’s Nett External Debt is about 50% of GDP. NZ is 225%.

      While the Japanese government borrows, the Japanese people save and invest – including in NZ. While in NZ, both the govt and the (bludging) population borrow overseas to fund spending today

      NZ’s nett debt is why NZ should be classes with Spain, Greece & Ireland – nowhere near Japan!

  • JimboBug

    To be fair the market would already have priced in that QE – if it was around expectation. Still doesn’t make it a stupid idea though.

  • 2ndAmendment

    The problem with NZ’s economy isn’t an “overvalued exchange rate”. It’s wages and taxes that are both far to high.

    Get real employment reform – back to the ECA of 1991, or ideally back to common law;
    get real tax cuts for businesses – a zero corporate tax rate

    and farmers & manufacturers would have no problems exporting quite successfully!

  • In Vino Veritas

    Japan is undertaking easing because of the fear of deflation, and they have no means of using interest rates to control it (since as pointed out the David B, rates are .1%!). Deflation has been a risk since 1990, and as we all know, well, except for Labour and the Greens, deflation causes economic contraction.

  • blazer

    an endless orchestrated game of pass the debt parcel and forex manipulation compliments of Wall St as they wreak global carnage ,secure in the knowledge that no matter what ,the U.S govt will bail them out.Since the GFC the investment banks are bigger and making bigger profits.Its all a fraudulent magic show.If Q.E is so bad for NZ …why is it so good for the U.K,U.S and ECB?

    • In Vino Veritas

      Because their interest rates give no scope for movement blazer. The threat of deflation and subsequent economic contraction have forced easing. Economics 101.

      • blazer

        there is no such thing as Economics 101.If there was ,the GFC would not have occurred.There is however propaganda with the ominous shadow of I have the most bombs….thats what the U.S has come down to.America used to be great.

        • onelaw4all

          There is such a thing as economics 101.
          Unfortunately most of the world has gone the way of central banks, Keynesian bullshit and deficit spending drunkeness.

          • blazer

            oh ,I see so everyone actually ignored ‘economics 101’!…do me a favour …!

          • onelaw4all

            Favour granted.
            Over the last century of so the world has abandoned basic economic principles in lieu of political expedience, in the form of expanded Progressive policy advancement.

          • blazer

            any evidence to back up your theory…i.e what ‘basic economic principles’?and please clarify Progressive policy advancement’…a semantic smokescreen it seems.

        • In Vino Veritas

          There is a difference between economics 101 and finance 101 blazer. No surprises that you cannot differentiate.

          • blazer

            no surprises that you cant see that they are inter related.

  • Johnny T

    The private sector in Japan has plenty of savings, no question, but the young and the people in the regions are doing it hard. Plenty of jobs in the regions of Japan advertised at $NZ10 an hour with plenty of takers.
    Government finances are a mess, and they have no hope of meeting future pension obligations. 50% of budget is met by bond issuance. The day of reckoning for the Japs is not far off.

  • Sir Cullen’s Sidekick

    Listen guys – Under Ozie Mozie’s regime, your salary will be 50,000,000 Kiwi liras and a loaf of bread will be 3,000,000 Kiwi liras and a litre of milk will be 1,000,000 Kiwi liras….

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