Chen Donghai: Does Kuroda Higashihiko Have Any Other Options?

On a large scale, Japan's QQE expanded by only about 15%, far less than a year and a half ago, but the two expansion has immediate impact on the financial market. The reason why the market is so fierce is that the last QE was anticipated by the market, and this time, the market did not expect Kuroda Higashihiko to make any sudden moves. Since October 31st, the Japanese stock market has risen nearly 10%, while the Japanese yen has depreciated more than 5% against the US dollar.

Not only is the global expectation of the sudden action of the Bank of Japan, but even the Bank of Japan, including Kuroda Higashihiko, did not expect to suddenly introduce a liberal monetary policy. According to common sense, Kuroda Higashihiko should decide whether to introduce new easing measures after next year or at least at the end of the three quarter of this year, such as GDP data. It is reported that, according to the plan, the Bank of Japan's policy meeting in October 31st only wanted to update the economic expectations rather than adjust monetary policy, but when the members submitted their respective expectations, it was found that the members of the committee had lowered their inflation expectations for the Japanese economy, and one of them lowered the inflation expectation to no more than 1%. This worries Kuroda Higashihiko, even if the Bank of Japan has lowered the expectations of future inflation, what kind of deflation panic will be caused by the transmission of such data and emotions to the market? An important part of the so-called "Andouble economics" has been sent to QE, which has pulled Japan out of the long term deflation quagmire, and its effectiveness and prestige are bound to be greatly reduced, thus making it impossible for Andouble economics to "collapse in the middle". In that case, the Japanese economy is afraid that it will never get out of the "lost twenty years" again. In order to avoid this terrible situation, Kuroda Higashihiko rushed out of the rush to expand the pace of easing.

It is precisely because of Kuroda Higashihiko's temporary intention to expand the QQE. Therefore, the Central Bank of Japan has divergent views on expanding loose opinions again. Apart from Kuroda Higashihiko, the other eight members are half supported and half opposed. However, there are suggestions that the support rate may be raised if the plan for enlarging the QQE is discussed at the next meeting. However, in addition to the above-mentioned concerns, it is also because the end of the year is a critical period for wage negotiations in Japan. If inflation expectations are high, it will help improve the bargaining power of Japanese workers and increase wages for employees, which will increase inflation.

After Andouble came to power two days ago, Japan's economic performance was not bad. In 2013, it was basically in positive growth. After entering 2014, the GDP data had been greatly disturbed by the increase of the consumption tax rate from 5% to 8%. The GDP growth rate increased sharply to 6% before the tax rate was raised, and it shrank sharply to -7.1% after the tax rate increased. Apart from the consumption tax factor, we need to look at the data of the three quarter and the whole year. If the increase in consumption tax really dealt a severe blow to the Japanese economy, it would be more appropriate to expand its name. Recently, Kuroda Higashihiko and Andouble have divided on whether to continue to raise the tax rate of Japan's consumption tax, and also reflect that Kuroda's temper is more urgent.

Kuroda Higashihiko's consultant Kawai Masahiro said the day before yesterday, "the Bank of Japan is buying a lot of low interest bonds, which will push up inflation. If the tax increases are postponed, Andouble will lose her financial credibility, push up the risk premium, and make the work of the Bank of Japan more difficult. "At the same time, Honda Etsuro, Andouble's economic adviser, said:" if Japan's GDP in the three quarter is below 3.8%, the consumption tax increase should be postponed for 18 months until real wages begin to grow. It is also reported that Andouble will decide whether to increase the Japanese consumption tax rate from 8% to 10% at the end of the year. Therefore, if Kuroda decides whether to expand the scale of QQE after more GDP data or Abe decides whether to raise the consumption tax rate again, the situation is more secure. If the situation in Japan is not good enough, and then expand the QQE, it will be able to save some Japanese consumers. confidence 。 Now the Bank of Japan has taken a step forward, and if there is a bad situation, there will be nothing new.

Look at prices. Japan The QQE seems to have worked. Before Andouble came to power and Kuroda Higashihiko became governor of the central bank, Japan's core consumer price index (CPI), which excludes energy and food prices, has been negative for a long time. It has been flat since then in 9 and October, and has broken through the key line 2% in April this year, after which it was basically flat at 2.3%.

Of course, Kuroda Higashihiko may know that in a long-term deflationary economy, its price movements, such as heavy load mountaineering and difficult uphill downhill, are very easy. If the core inflation index is declining again for several months, the price situation will be very severe. At the same time, Kuroda Higashihiko may also be worried that the fall in crude oil prices will have an adverse effect on Japan's inflation expectations, so we can hardly wait to play.

however Haruhiko Kuroda The timing is still controversial. At present, the external situation is conducive to maintaining the distance between Japan and deflation. Although the price of crude oil has been falling, Japan has to import imported energy instead of nuclear power in the nuclear accident after the great earthquake. Second, under the current circumstances, the yen is hard to get a big boost, which is conducive to the price trend in Japan. Because Japan has been in trade deficit for more than 3 consecutive years, and because of the significant appreciation of Japanese yen in the past, the Japanese yen has been partly transferred to overseas. Therefore, the weaker yen actually has no positive effect on Japanese exports, but under the current general trade deficit, the weaker yen can raise the import price level of Japan.