A Benjamin Cole post
The Bank of Japan has been pursuing a moderately robust QE policy for the last year, as a resolute BoJ Governor Haruhiko Kuroda pursues a 2% inflation rate on the islands. For the twenty years preceding 2012, Japan experienced minor deflation, and a real GDP growth rate well under 1%.
With Kuroda in charge at the BoJ, the Japanese yen has recently fallen from about 80 to the U.S. dollar to 124 or so.
This news came in last week—tourism is up 46% YOY in Japan, first half of 2015. 46%! For the first time since the 1970, more tourists are visiting Japan than Japanese visiting offshore. Tell the Japanese tourism industry that QE does not work.
Meanwhile, the Nikkei 225, a broad gauge of the Japanese stock market, is up 36% YOY, as of this writing. (It is one of the oddities of the age that many free-marketeers, who habitually pointed to stock markets in years past as the acid test for economic performance and prospects, now define any stock market increase as a “bubble.”)
Real economic growth in Japan as measured in Q1 was still weak, at a 1% annual rate or so, and inflation (minus food and energy) up at 0.7% annual rate in May.
Yes, Japan is now better off than Singapore, with its present deflationary contraction. Still, if anything, Kuroda (perhaps limited by other BoJ board members) has been too timid.
The Bank of Japan should probably increase the size of its QE program.
Maybe they can double the Japanese tourism industry. Because, you know, QE doesn’t work.