Thursday, August 4, 2016

Japan Recognizes That Quantitative Easing Has Failed #CentralBanks #Fed #ECB #BOJ

Japanese bonds have 'crashed' after the government recently announced that they've stopped its bond-buying program at least temporarily. This move, a decision facing other western central banks, highlights the failed monetary policy of quantitative easing (QE) since 2007. QE policies designed to stimulate borrowing and economic growth through support of the bond markets have failed from the United State to Europe because the expectation of profit in excess of borrowing costs have failed to rise as the global economy slowly crumbles; the old saying you can lead a horse to water but you cannot make it drink applies here. Rather than stimulating economic growth, QE programs are policies that are wiping out savers, pension funds, and insurance companies. Apparently, Japan is one of the first nations to recognize the futility of the program without officially saying it.

The selling will accelerate once price breaks below 2016 trendline and support (chart 1). Politician may play dumb a lot, but they generally know what's coming. Trends starting in Europe will spread to Japan and the United States eventually.

Chart 1 Japanese Bonds

Chart 2 German Bonds

Headline: Japanese Bond Selloff Pushes Yields Near Positive

A selloff in Japan’s 10-year government bonds sent these negative-yielding assets within a hair of positive territory.

Yields on the benchmark 10-year Japanese government bond rose Tuesday as high as minus-0.025%—the highest level since March 16—compared with minus-0.145% Monday. They were around minus-0.06% late afternoon in Asia. Yields rise when bond prices fall.



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