Title: Japan's Lowflation Problem
Headings: Japan's Lowflation Problem
May 30, 2021,05:30pm EDT
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Japan's Lowflation Problem

Content: Firstly, I don’t think it is likely. As I noted earlier, the Bank of Japan’s assets are mostly Japanese government debt, and most of what the Bank doesn’t hold is owned by Japanese citizens, predominantly as retirement savings. Why would they reject the savings they need for their old age? Anyway, the Bank of Japan has made it very clear that if yields show any sign of rising, it will simply buy more bonds to push them down again. This is a battle that markets can’t win. Shorting Japanese government bonds is known as the “widowmaker” trade for very good reasons. Secondly, I don’t think hyperinflation is remotely likely either. Hyperinflation occurs when the population rejects the currency. But Mrs. Watanabe’s life savings are in yen, and she isn’t getting any younger – the median age in Japan is already over 46 for men and 48 for women. Why would she reject the yen?