Japanese Contemplations

by Aaron Krowne

Some things to ponder regarding financial ramifications of the continuing disaster in Japan:

• As of today, the Bank of Japan has “quantitatively eased” (printed) $700 billion worth of new money into the Japanese financial markets to stabilize them.
• The worst rebuilding cost estimates I’ve heard to date are $60-120 billion equivalent.
• Isn’t it kind of weird that the government can put such a large quantity of new money into play, with no deliberation, to “stabilize” financial markets (and suppress the Yen), which totally dwarfs the disaster itself (as well is the amount the government itself is likely to put into rebuilding)?
• Can the BoJ ever realistically withdrawal this crisis easing?  Will the political will to do so exist?
• Japan has just entered into its era of net withdrawals from pension funds to support its retirees (for the last two decades, it had been depositing money into such funds, essentially supporting the BoJ’s massive borrowing, 200% government deficit, and money printing.)
• What does this all imply for the long-term prospects of the Yen?