This article answers two questions - the real role of Japan's ycc policy, and the reasons for Japan's deflation.
The following content is completely outside the framework of Western economics and only talks about facts rather than theory.
Japan's YCC locks in both long-term and short-term interest rates at 0, close to 0.
This monetary policy has two effects -
The first is that it is difficult for foreign capital to flow in, so that no one can invest in Japan. Because no matter which country you are in, your local currency cost is higher than that of Japan. If you want to invest in Japan, you must first bear an interest rate loss. Can Japan provide you with a return higher than the interest rate spread? You want to p eat!
Then Japan’s domestic market is the Japanese’s own capital market. All profits in this capital market are Japan’s own, and foreign capital is rejected in disguise. I have only heard that large domestic companies in Korea are actually controlled by the United States. I have never heard of it. There are rumors that American capital is behind Japanese national companies. Let me give you an ordinary example: the largest controlling shareholder of the Mitsui Group is the Mitsui Foundation, the Japanese conglomerate is in power, and the Korean conglomerate is just white gloves. Is this a realistic example of "no one can take advantage of me as long as I'm a piece of crap"? !
This policy is extremely beneficial to Japan's domestic capital, and it is also the best posture Japan has taken within the dollar system. Of course, it is also the reason why Japan desperately wants to maintain the dollar system. Now I feel more and more that Japanese economists are much better than Western economists. To put it bluntly, Western economics is a way of brainwashing capital to fool its prey. Japan knows how to obtain the maximum benefits under the existing system and protect the maximum interests of its own group. By analogy, it is like sea cucumbers spitting out their internal organs to save their lives when they are in danger, but the body can always survive.
Everyone says that capital has no borders. I think this is prejudice, or this view itself is the rhetoric of the United States, a country of immigrants. For a country with a history of great unification, capital is more or less national in nature. Therefore, the ultimate ownership of Japan's capital is still Japan.
The second impact: YCC guarantees the extremely low cost of Japanese capital's foreign investment. Therefore, even though Japan's trade deficit has repeatedly hit new highs, the current account has remained at a constant level all year round, and hundreds of billions of dollars have been credited every year. With such a generous reward, how difficult is it for you to let boj buy another trillion U.S. bonds? ! Anyway, I earned it back in a few years.
In this regard, the Bank of Japan is much more independent than other countries!
Japan's low interest rate ensures that domestic capital will not be meddled by foreign capital, so under the scythe of the United States, there will be no risk of collapse caused by a large outflow of foreign capital, which will only drive the enthusiasm of Japanese domestic capital to invest wildly abroad, and the exchange rate will be affected, just like last year. , but what does it matter? When Japan’s foreign investment returned to China, the exchange rate was still 20% lower than that of a year ago. It also took advantage of the high interest rates outside, and then took the advantage of the exchange rate when it returned home. It was a real win! Don't judge Japan by countries that need foreign capital. Japan is not short of capital and does not need foreign capital at all.
Let me try to answer: Why does Japan have no inflation all year round and is in a state of de facto deflation?
Is this the greatest economic puzzle of the 20th century?
In the past, we always looked for reasons from the consumer side, and regarded monetary policy as the result of inflation, and monetary policy was born for inflation.
Now we change the direction and regard monetary policy as the cause of inflation, and this problem will be solved at once.
Inflation is why, currency circulation/commodity circulation.
When the commodity circulation is constant, the decisive factor is the currency circulation, just like Japan is an island country with leaks from all sides. The currency issued by Japan did not stay in Japan, but all flowed abroad, because the interest rate in Japan is too high. Low income and no income force money outflow in disguise.
Since all the money is outflowing, how can there be inflation in the country? This is why there is no inflation in Japan.
It seems that boj has worked hard to get inflation up and has achieved nothing. It seems that the work is in vain, but it is actually good for Japanese capital to invest abroad~
From this point of view, Japan has subverted Western economics and is the originator of Erdogan's economics. The main reason Erdogan learns from the tiger is that Turkey really needs foreign capital...
So now I am very curious why the whole world thinks that the Bank of Japan will change its ycc policy if it changes its governor?
If you really want to give up ycc, the return of Japanese capital will cause inflation. If Japan’s personal income that has not increased all year round is matched with inflation, Japan is estimated to explode.
Of course, at the same time, it may also attract foreign capital to enter the market. It could have sucked blood from the outside, but now the capital flows back to suck blood from the inside. Is it better to suck in the outside or suck in yourself? Is there anyone who can answer such a simple question wrong? Unless the US forces Japan to do so...
Then let's look back at the news that Buffett announced his investment in Japan. The news I saw was that he had made a lot of money. I was skeptical that he could make a p money with the soaring volatility of the yen! This year he should have increased his holdings of Japanese stocks. Does this mean that American capital has begun to enter Japan, and then cooperate with forcing Japan to raise interest rates to make the yen appreciate and realize double profits in exchange rate investment?
USDJPY's vol has been soaring in the past year, which is not at all like a developed country currency, or a safe-haven currency in the traditional sense. The violent fluctuation of the exchange rate is actually a kind of protective measure in itself. If you can't handle my frenzied volatility, don't get involved in my capital market. From another perspective, whoever is entangled by the python doesn't struggle violently, he can't take the initiative to sacrifice himself!
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