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Yen Sinks to a 20-Year Low, But BOJ Sticks With Ultra-Low Interest Rates

In contrast to the rest of the world trying to reduce inflation, Japan wants more of it. I can help.
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Japanese Yen chart courtesy of StockCharts.Com

Japanese Yen chart courtesy of StockCharts.Com

In 2011 it took only 75.5 Yen to buy one US dollar. This morning the Yen sank to a fresh low of 132 Yen to buy one US dollar.

Important to Remain Stable 

Bloomberg reports Japan Officials Back on Alert After Yen Sets Fresh 20-Year Lows

Senior Japanese government officials said they were closely watching currency markets with a sense of urgency Tuesday as they returned to a heightened state of alert following a renewed slide in the yen to fresh two-decade lows.

“It’s important that exchange rates remain stable, and reflect economic fundamentals,” said Finance Minister Shunichi Suzuki speaking to reporters in Tokyo after the yen breached the 132 mark against the dollar earlier in the day. “The government is watching foreign exchange market moves and their impact on the Japanese economy with a sense of urgency.”

Hoot of the Day

The yen has fallen 43% since 2011 and 22% since 2021 vs the US dollar and Japan is preaching stability. 

The Bank of Japan said it will stick with aggressive monetary policy to support the economy and raise inflation. 

“The BOJ will persistently continue with the current strong monetary easing and firmly support economic activities,” said Kuroda. “We’re aiming for a virtuous cycle in which prices rise moderately while corporate profits, employment and wages improve.”

And alleged "virtuous cycle of inflation" is worth another hoot. 

Sure Fire Proposal to End Japanese Deflation

It's time to dust off my 2016 friendly advice to the Bank of Japan.

Please reconsider Mish’s Sure Fire Proposal to End Japanese Deflation: Negative Sales Taxes, 1% Monthly Tax

Four Pronged Proposal to End Japanese Deflation

  1. Negative Sales Taxes
  2. One Percent Tax, Per Month, on Government Bonds
  3. National Tax Free Lottery
  4. Hav-a-Kid

Negative Sales Taxes

People hoard cash, especially the miserly wealthy. We need to unlock that cash and put it to work.

To free up this money, I propose negative sales taxes. The more you spend, the more money you get back as a direct tax credit against income taxes.

One Percent Tax Per Month on Government Bonds

Negative interest rates are in vogue. However, all negative interest rates have done is to get those with money to hoard bonds.

I have just the solution. Tax government bonds at the rate of 1% per month.

No one will want them. Hedge funds and pension plans will dump sovereign bonds en masse.

This will allow governments to buy every bond in existence immediately. As soon as the government corners the bond market (at effectively zero cost), debt and interest on the debt will truly be owed to itself.

Once the bond market is 100% cornered, I propose government debt be declared null and void annually. This would effectively wipe out the entirety of Japan’s debt.

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National Tax Free Lottery

Every Japanese citizen 16 years and older is automatically entered into a weekly lottery.

A day of the week for the previous week is pulled at random. Then the name of a person is drawn at random. If you purchased at least $15 by a credit card on that day, and your name is drawn, you win $1,000,000.

If there is no winner, the amount rolls over. The winner gets a debit card and must spend at least half of the money in a year or the remaining amount is forfeited. 

This item is revised from the original post. 

Hav-a-Kid

Demographics in Japan are a huge problem. Although various incentive have been tried, none of them have gone far enough.

I propose a reduction in income taxes for everyone starting a family. The following scale applies.

  • One new child: 50% reduction in income taxes for a period of ten years.
  • Two new children: 100% reduction in income taxes for a period of twenty years.
  • Three new children: Subsidized housing, free healthcare, free schooling, and no income taxes for thirty years.
  • Those with one new child in the last five years get full credit if they add at least one more child in the next five years.

Guarantee

I absolutely guarantee my plan will end deflation in a jiffy.

My Price

My price for this amazing plan is $0. It’s free for the taking.

Yet, zero seems woefully inadequate for such a brilliant plan that is absolutely guaranteed to work, especially when Japan has tried and failed for decades to produce inflation.

Moreover, paying nothing hardly seems correct for a country so desperate to get out of deflation.

Thus, if offered, I will graciously accept $1,000,000 for each one-tenth of one percent rise in Japanese inflation if Japan simply follows my plan.

This post originated on MishTalk.Com.

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