Monday, August 25, 2014

Kuroda Warns JGBs will drop in value this fiscal year

In Jackson Hole, Kuroda said:
Mr. Kuroda vowed to maintain Japan’s aggressive monetary-policy easing until the country reaches its 2% inflation target, which he said could happen as early as this fiscal year.
Mr. Kuroda said that once inflation starts moving higher, 10-year government bond rates around 0.5% will not be sustainable.
If interest rates are going up then bond prices are going down.

I think Japan is primed for hyperinflation and just needs some kind of spark to light the positive feedback loop.  Bonds dropping could be the thing to get the ball rolling.  People don''t like to hold bonds that are dropping in value.  The more people who sell the more they will drop in value.  So we could set off the feedback loop.  In fact, just the central bank chief saying bonds will be dropping might even be enough of a trigger.


  1. Wouldn't it be interesting to study historical cases of high indebtness that didn't lead to hyperinflations and analyse what is common among them just as you've done for hyperinflations? This would probably make it easier to analyse when a situation is solvable and when it has gone beyond that point.

    1. Yes, it would be interesting. I would expect it to be indebtedness levels just below those leading to hyperinflation but it would help to locate the "gone too far to fix" level. An interesting one is the USA after WW2. The debt/gdp was high but after cutting back the military there was no deficit so things did not get out of control.

    2. Right and even more so in UK. Their debt to GDB in 1947 was as high as the current level in Japan and still they managed to slowly grow out of it. With the difference that they could cut back on military spending off cource. I've been googling this a bit but haven't found many examples so far.


Looking for polite debate on ideas. Never attack a person. Be nice.