The Bank of Japan finds itself in one hell of a mess, one in which they may not be able to control the outcome despite their best efforts.
Here’s what the BoJ wants:
Stronger yen - They’re obviously not getting this after years of easy money policy and traders betting trillions of dollars on the yen carry trade.
Sustainable inflation - It looked like they might get this during the global inflation boom, but it’s since dissipated. According to some measures, inflation is currently running at about a 1% annualized rate, but the latest Tokyo CPI rate came in at 2.2%. Either way, the economy is struggling to stay out of disinflation.
Economic growth - Year-over-year GDP growth fell to -0.2% in Q1. Japan is closer to recession than growth.
The lack of progress on both sustainable inflation and sustainable growth has made Japan’s monetary policy choices a major outlier in the global landscape. That’s something that could eventually take down the entire global economy.
Let me explain…
