Oct 27

Related info:

‘Japan Has No Alternative But To Print And Print And Print’ (Chart Of The Day)


What Will It Take To Blow Up The Entire Japanese Banking System? (Not Much, According To The Bank of Japan) (Testosterone Pit, Oct 23, 2013):

Hideo Hayakawa, former Bank of Japan chief economist and executive director, set the scene on Wednesday when he discussed the BOJ’s ¥7-trillion-a-month effort to water down the yen by printing money and gobbling up Japanese Government Bonds. It wants to achieve what is increasingly called “2% price stability,” a term that must be a sick insider joke played on the Japanese people. He warned that if these JGB purchases are “perceived as monetization“ of Japan’s out-of-whack deficits, it would drive up long-term JGB yields “to 2% to 3%.” Up from 0.60% for the 10-year JGB. “But once interest rates start rising, they would overshoot,” he said. So maybe 4%?

He’d set the scene for the Bank of Japan’s 81-page semiannual Financial System Report, released the same day. Buried in Chapter V, “Risks borne by financial intermediaries,” is a gorgeous whitewash doozie: if interest rates rise by 1 percentage point, it would cause ¥8 trillion ($82 billion) in losses across the banking system.

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