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Japan Expects to Hit 2% Inflation in 5 Years, Aggressive Easing Will Continue

The BOJ thinks Japan may hit its 2% inflation target in 5 years. Kuroda says risks are to the downside.

It may take Japan five more years to reach its 2% inflation targetaccording to BOJ governor Haruhiko Kuroda.

“Sometime within the next five years, we will reach [our] 2 percent inflation target,” Governor Haruhiko Kuroda told CNBC’s Sara Eisen over the weekend. Once that level is reached, we will start “discussing how to gradually normalize the monetary condition.”

Inflation remains low. Japan reported its consumer price index, excluding fresh food and energy, rose half a percent in the 12 months through March.

“In order to reach [our] 2 percent inflation target, I think the Bank of Japan must continue very strong accommodative monetary policy for some time,” Kuroda added in his interview with CNBC.

Protectionism, unexpected rapid tightening of monetary policy in some countries, and geopolitical tensions in North Korea and the Middle East pose potential risks, Kuroda said.

It’s pretty amazing how Japan has failed to destroy its currency despite decades of trying. Once again, I repeat my foolproof plan to cure low inflation in Japan.

Mish’s Four Pronged Proposal to End Japanese Deflation

  1. Negative Sales Taxes
  2. One Percent Tax, Per Month, on Government Bonds
  3. National Tax Free Lottery
  4. Hav-a-Kid

Why wait another five years?

Here is my follow-up article that brings MMT into the picture: Note to BoJ: Try Something Different or Look Perpetually Foolish.

Bank of Japan Buys Record Amount of Equity ETFs: Once Upon a Time

The Japanese stock market fell, so the Bank of Japan bought more equity funds.

After cornering the bond market, the Bank of Japan has its sight on the stock market with a Record Buying Binge in March.

The Bank of Japan spent 833 billion yen ($7.8 billion) on exchange-traded funds tracking the country’s shares last month, the largest amount ever according to data back to 2010. The BOJ stepped in as the Japanese market slumped and its benchmark Topix index inked its first back-to-back monthly declines since the start of 2016. Haruhiko Kuroda’s bank is now ahead of its scheduled goal to spend about 6 trillion yen a year on ETFs. “If the market keeps on falling, there will be the problem of what they do next,” said Kazuyuki Terao, chief investment officer for the Japan arm of Allianz Global Investors.

Problem? What Problem?

Just buy them all. 100% of every ETF. Given the Bank of Japan has cornered the bond market, it’s simply the logical next step.

Once Upon a Time

Once upon a time, I seem to recall central banks discussing and setting monetary policy in a very strange way.

For those of you not old enough to remember, the Fed and other central banks actually discussed the growth rate of money supply at monetary policy meetings.

How peculiar, to actually discuss money at monetary policy meetings. Those silly days are gone.

New Normal

  • Central banks now sponsor negative interest rates, something that could never happen in the real world.
  • The Bank of Japan and the Swiss National Bank are playing roulette with the stock market.
  • The Fed embarked on three rounds of QE to force bond yields lower.
  • The ECB is still at it, in a clear attempt to keep Italy on life support.

…click on the above link to read the rest of the article…

Building The World’s Largest Solar Project

Building The World’s Largest Solar Project

Saudi Arabia wants to pour $200 billion into solar to build the world’s largest solar project.

The Saudi sovereign wealth fund and SoftBank Group Corp. of Japan jointly announced plans to build a solar project that is staggering in size – 200 gigawatts (GW) by 2030. That would be about 100 times larger than some of the largest projects in the world right now. “It’s by far the biggest solar project ever,” Masayoshi Son, CEO of SoftBank said at a news conference Tuesday in New York after signing a nonbinding agreement with Saudi Crown Prince Mohammed bin Salman (MbS).

The project would begin with a $5 billion investment, initiated this year, which would translate into about 7.2 GW, slated to come online in 2019.

The logic of massive and aggressive development of solar in Saudi Arabia is obvious. Sunshine is not a scarce resource. The country burns oil for about a third of its electricity, a costly way of generating power both environmentally and in terms of lost oil exports. SoftBank’s Son said the 200 GW of solar would cut electricity costs by $40 billion while creating some 100,000 jobs.

The scale of the construction would alone help develop a domestic solar manufacturing industry in Saudi Arabia, SoftBank’s Son said. The project will eventually integrate energy storage, although not right away.

Moreover, the project would be a cornerstone of MbS’ long-term economic strategy, with clear spin off benefits in terms of economic diversification, employment, and a strategy for a post-oil economy.

…click on the above link to read the rest of the article…

Japanese Bubble Bursting Playbook

JAPANESE BUBBLE BURSTING PLAYBOOK

Every now and then I stumble across a new source of information that I can’t wait to share with my readers. Today is one of those days. If you have even the tiniest shred of interest in commodities, then head over to the Goerhring & Rozencwajg website immediately. It’s just terrific stuff.

I must admit to being partial to their bullish commodity story, but in a recent RealVision TVinterview, Leigh Goehring solved a problem that I have wrestled with for some time.

What if China rolls over?

We all know the China bear story. For the past couple of years, famed China skeptics like Jim Chanos (FT Article – “China:market bulls beat the short sellers – for now”) and Kyle Bass (Reuters Article – “China credit bubble ‘metastasizing’”) have been warning about a China credit bubble implosion. Although I am hopeful that China will avoid the apocalyptic scenario they paint, there is a little part of me that worries when I am betting against Chanos.

Chanos might have lost the Tom Selleck mustache (and in the process, given away a fair amount of his hipster cred), but I hate being on the other side of his trade. I am pretty sure God has an account at Kynikos Accociates. They are simply that good.

So I have always struggled with being long commodities in the face of a potential China credit implosion. After all, China is the world’s largest importer and user of commodities, a slowdown would be catastrophic for commodities, right?

Not so fast. As Leigh Goehring so aptly notes, a great analogy for a potential China credit crisis would be the Japanese credit collapse of 1990.

There can be no denying that in the wake of the Japanese bubble bursting, their economy suffered a credit contraction that rivals the world’s greatest slowdowns. Given this horrible setback, it would be logical to conclude that Japan’s commodity usage suffered a similar contraction.

…click on the above link to read the rest of the article…

False Alarms and Exaggerated Threats 

False Alarms and Exaggerated Threats 

Photo by Anthony Quintano | CC BY 2.0

Three days after the January 13 false alarm of a North Korean nuclear attack on Hawaii, Japan’s public TV broadcaster NHK issued its own false alarm around 7 p.m., warning in error that North Korea had launched a missile at Japan. As reported by CNN, Jan. 17, and by the New York Times, National Public Radio, and Reuters Jan. 16, the shocking message was received by Japanese smart phone users and by NHK TV website viewers.

Like in Hawaii, the Japanese public was amazed to read, according to a translation from Reuters: “NORTH KOREA APPEARS TO HAVE LAUNCHED A MISSILE. THE GOVERNMENT URGES PEOPLE TO TAKE SHELTER INSIDE BUILDINGS OR UNDERGROUND.”

Unlike Hawaii’s scare, which threw the state’s population of 1.4 million into a panic, NHK Japan’s fake news was broadcast nation-wide to about 127 million people. The TV network blamed the terror alert on a “switching error” and corrected it in less than 10 minutes. “We are deeply sorry,” NHK announced on its 9:00 p.m. news Jan. 16.

In Arsenals of Folly, author Richard Rhodes documents how US government “officials frequently and deliberately inflated their estimates of military threats facing the United States, beginning with … exaggerated Soviet military capabilities.” A review in the Feb. 7, 2008 New York Review of Books said, “The exaggeration of foreign threats, however pernicious, is a tactic,” and quotes Rhodes’ study: “Threat inflation was crucial to maintaining the defense budgets… Fear was part of the program …”

The New York Review also noted that in 1998, the US Commission to Assess the Ballistic Missile Threat to the United States “warned that Iran and North Korea could hit the US with missiles within five years.” Twenty years later, neither country can do so.

…click on the above link to read the rest of the article…

US Stock Market: Conspicuous Similarities with 1929, 1987 and Japan in 1990

Stretched to the Limit

There are good reasons to suspect that the bull market in US equities has been stretched to the limit. These include inter alia: high fundamental valuation levels, as e.g. illustrated by the Shiller P/E ratio (a.k.a. “CAPE”/ cyclically adjusted P/E); rising interest rates; and the maturity of the advance.The end of an era – a little review of the mother of modern crash patterns, the 1929 debacle. In hindsight it is both a bit scary and sad, in light of the important caesura it represented. In many ways the roaring 20s were the last hurrah of a world in its death throes, a world that never managed to make a comeback. The massive expansion of the State that had begun in the years just before WW1 resumed in full force as soon as the post-war party on Wall Street ended. The worried crowd that formed in the streets around the NYSE in the week of the crash may well have suspected that the starting gun to profound change had just been fired. [PT]

Near the end of a bull market cycle there is always the question of when a decline will begin, and above all, how large will it be. I believe it possible that the retreat in prices will begin soon and that it could possibly even start out with a crash. I will explain in the following what led me to draw this conclusion.

2015 – 2018: the S&P 500 Index Moves Up Along a Well-Defined Trend Line

…click on the above link to read the rest of the article…

Something Unexpected Just Happened In LNG Markets

Something Unexpected Just Happened In LNG Markets

LNG

In the increasingly topsy-turvy world of liquefied natural gas (LNG) markets, the world’s largest LNG importer could soon be exporting the super-cooled fuel to the world’s second largest LNG exporter – a situation unimaginable, even laughable just a few years ago.

On Monday, news broke that a Japanese consortium, made up of JERA, the world’s largest private LNG buyer, and Marubeni Corp., were planning to export gas to industrial users on Australia’s eastern coast. There is even a possibility that the Japanese consortium will construct an LNG import terminal in New South Wales (NSW), Australia’s most populous state.

A report three days ago in The Australian Financial Review said that the proposed terminal’s imports could represent up to 75 percent of NSW’s gas demand, while plans to increase the number of gas-fired power stations will increase that demand pull.

How could Japan, for all practicable purposes a hydrocarbon anemic country with scant oil and gas resources, import gas to oil and notably gas rich Australia?

The answer is straight forward: In an effort lock in lucrative prices for LNG in the Asia-Pacific region amid limited supply around the start of the decade, Australia went on an LNG export project development feeding-frenzy. Since the country doesn’t have an energy master plan there was no coordination on these massive CAPEX export projects. Adding insult to injury, budget blowouts and cost overruns since then have been the norm, casting further doubt on the wisdom of Australia having as many as ten major LNG export projects.

As a result, Australia will soon overtake Qatar as the world’s largest LNG exporter, with more than 80 million tons per annum (mtpa) of liquefaction capacity. Qatar, however, and likely for geopolitical reasons as much economic, has vowed to increase its production capacity from 77 mtpa to over 100 mpta in the next five years.

…click on the above link to read the rest of the article…

Japan Erects Huge New Roof Above Crippled Fukushima Reactor

In what the Japanese press heralds as an important step to safely removing all the radioactive material left inside the Fukushima-Daiichi nuclear power plant’s ruined reactors, the Japanese utility in charge of cleaning up the site has finished installing a roof over reactor No. 3.

The work started last August to set up a dome-shaped cover. It is part of preparations for removing nuclear fuel from the reactor’s storage pool. A total of 566 spent and unused fuel units remain in the storage pool of the No. 3 reactor.

On Wednesday, workers installed the last part of the cover, which is 17 meters high and 22 meters wide, and weighs 55 tons.

Tepco, which ran the plant and also criminally lied and obscured the full extent of the radioactive leakage caused by the disaster, is scrambling to accomplish as much as possible ahead of the 2020 Summer Olympics in Tokyo. Cleanup of the power plant’s crippled reactors – which experienced meltdowns when a tsunami thrashed the Japanese coast back in 2011 – is expected to take decades.

More recently, Tepco has been criticized for draining what it described as “harmless” radioactive material into the water near the plant – sparking outraged local fishermen to fight back.

Last year, the Japanese government started cutting benefits for people who were forced to flee their homes and possessions because of the disaster.  This has forced some people to move back to the exclusion zone for the first time since the initial evacuation. Photos of the area depict a nightmarish ghost town overrun by radioactive wild boars.

it is unclear what the true radiation level is in the zone, as none of the government’s data are reliable or credible.

…click on the above link to read the rest of the article…

Message from Planet Japan: The good times never last forever

Message from Planet Japan: The good times never last forever

After having traveled to more than 120 countries in my life, the only person I know who’s been to more places than I have is Jim Rogers.

Jim is a legend– a phenomenal investor, author, and all-around great guy.

(His book Adventure Capitalist is a must-read, chronicling his multi-year driving voyage across the world.)

Some time ago while we were having drinks, Jim remarked that he occasionally tells people, “If you can only travel to one foreign country in your life, go to India.”

In Jim’s view, India presents the greatest diversity of experiences– mega-cities, Himalayan villages, coastal paradises, and a deeply rich culture.

My answer is different: Japan.

To me, Japan isn’t even a country. Japan is its own planet… completely different than anywhere else in ways that are incomprehensible to most westerners.

(Watch my friend Derek Sivers explain it to a TED audience here.)

On one hand, this is a culture that strives to attain beauty and mastery in even mundane tasks like raking the yard or pouring tea.

Everything they do is expected to be conducted to the highest possible standard and precision.

They start the indoctrination from birth; Japanese schools typically do not employ janitors and instead train children to clean up after themselves.

Later in life, the Japanese salaryman is expected to practically work himself to death (or suicide) for his company.

Obedience and collectivism are core cultural values, and the tenets of Bushido are still prevalent to this day.

One of the most remarkable examples of Japanese culture was the aftermath of the devastating 2011 earthquake (and subsequent tsunami) in the Fukushima prefecture.

…click on the above link to read the rest of the article…

Asia Is About To Be Hit By The “Worst Oil Tanker Spill In Decades”

The Sanchi disaster is even worse than many initially expected, according to a chilling new report published by Britain’s National Oceanography Centre that shows the ship’s cargo – the equivalent of nearly 1 million barrels of ultra-light crude, plus its own fuel – snaking across the East China Sea into the northern Pacific, according to a series of visualizations created by Reuters.

Sanchi

The Panama-registered vessel burst into flames after colliding with a cargo ship off the east coast of China while on its way to South Korea. The disaster, which took place in the East China Sea, is the worst oil spill since Exxon Valdez.

The Sanchi tanker and a cargo ship collided 260km (160 miles) off Shanghai on Jan. 6. Afterward, the tanker – which burned for a weekbefore exploding and sinking – then drifted south-east towards Japan.

At the time, the Iranian press reported that all 32 crew members – 30 Iranians and two Bangladeshis – died in the accident. The tanker was carrying 136,000 tonnes of ultra-light crude. The always-credible Chinese media claimed that no oil slick had formed.

Authorities have had trouble pinning down how big the spill is, as it changes by the day amid strong ocean currents. But concerns are growing about the potential impact to key fishing grounds and sensitive marine ecosystems off Japan and South Korea, which lie in the projected path of the oil, according to Britain’s National Oceanography Centre.

“An updated emergency ocean model simulation shows that waters polluted by the sinking Sanchi oil tanker could reach Japan within a month,” the center said a report posted on Jan. 16. “The revised simulations suggest that pollution from the spill may be distributed much further and faster than previously thought, and that larger areas of the coast may be impacted.”

…click on the above link to read the rest of the article…

 

Japanese Public Broadcaster NHK Issues False Alarm Over North Korean Missile Launch

It’s deja vu, all over again.

Just four days after residents of Hawaii lived through 38 minutes of doomsday hell, after a false public broadcast alarm announced that a ballistic missile launch was headed for the island, only to reverse and announce later it was a mistake, moments ago Japan’s National broadcaster NHK’s app issued a false J-Alert to phones over a North Korean missile launch at 6:55 p.m. Tuesday evening local time.

The message, received by phone users with the NHK app installed on their devices, read: “NHK news alert. North Korea likely to have launched missile. The government J alert: evacuate inside the building or underground. “


: Japan’s national broadcaster NHK just sent a text alert reporting that North Korea launched another missile … and then corrected itself

NHK accidentally sends missile alert, similar to that of Hawaii from a couple days ago… uhhhh….


It then promptly corrected the error just 5 minutes later, at around 7 p.m.

After the false alert, NHK issued an on-air apology on Tuesday evening local time, saying “the news alert sent earlier about NK missile was a mistake. No government J alert was issued.”

“Around 6:55pm earlier we reported on the NHK’s news site and NHK’s news disaster prevention application ‘Pattern of North Korean missile launch’ but this was incorrectly issued. J alert has not appeared. I must sincerely apologize,” the news outlet wrote.

…click on the above link to read the rest of the article…

2018: The Year of Living Dangerously

2018: The Year of Living Dangerously

I’m calling 2018 “The Year of Living Dangerously.”

That description might seem odd to lot of observers. Major U.S. stock indexes keep hitting new all-time highs. 2017 went down as the first calendar year in which the Dow Jones industrial average was up for all 12 months.

Even in strong bull market years there are usually one or two down months as stocks take a breather on the way higher. Not last year. There’s been no rest for the bull; it’s up, up and away.

Inflation is tame, even too tame for the Fed’s liking. The unemployment rate is at a 17-year low. U.S. growth was over 3% in the second and third quarters of 2017, much closer to long-term trend growth than the tepid 2% growth we’ve seen since the end of the last recession in June 2009.

The U.S. is not alone. For the first time since 2007, we’re seeing strong synchronized growth in the U.S., Europe, China, Japan (the “big four”) as well as other developed and emerging markets.

Growth breeds growth as consumers in one country create demand for goods and services provided by another. This is what economists mean by “self-sustaining” growth instead of force-fed growth from easy money and government spending.

Technology rules the day. The pace of innovation is unprecedented in world history. Our daily needs are being fulfilled better, faster and cheaper by the likes of Amazon, Google, Netflix and Apple. We can share the good news on Facebook.

Best of all, the U.S. Congress and White House got around to cutting our taxes in late December!

In short, all’s right with the world.

Or not.

…click on the above link to read the rest of the article…

‘Pacifist’ Japan Is Building Missile Bases To Counter China And North Korea

‘Pacifist’ Japan Is Building Missile Bases To Counter China And North Korea

Yesterday, we published a report about an incident involving South Korea, Japan and China that nearly escalated into a full-blown skirmish, as Japan and South Korea were forced to order intercepts of Chinese military aircraft as a squadron of fighters and bombers flew over the waters between South Korea and Japan – an area that has historically been off limits to Chinese aircraft. It wasn’t until after the Chinese aircraft had dispersed that Chinese military commanders disclosed that the intrusion was part of a “military exercise.

When China’s South Korean counterparts called to ask why they hadn’t been given advanced warning of the drills, the Chinese authority in charge reportedly responded that the element of surprise was part of the drill.

In recent months, Beijing has insisted that it needs to prepare its military in the event of an armed conflict on the Korean peninsula – an excuse for bulking up its military presence at an uncomfortably close proximity to its geopolitical archrival, Japan.

In response, Japanese Prime Minister Shinzo Abe is accelerating Japan’s militarization as the country inches closer to abandoning its post-WWII policy of pacifism. The latest example of this shift was highlighted by the Wall Street Journal in a report published Wednesday about Japan’s push to build a military installation equipped with antiaircraft and antiship weapons on the island of Ishigaki, a Japanese holding situated near Taiwan, and just miles away from a Chinese waters.

Of course, Japan is facing a more immediate threat in North Korea – which has twice fired intermediate-range ballistic missiles over the Japanese island of Hokkaido. But as both powers pose increasingly immediate threats to Japanese security, Japan is being forced to swiftly build up its military deterrants as the possibiilty of an armed conflict in the region becomes increasingly less remote.

…click on the above link to read the rest of the article…

Chinese Navy Begins Live-Fire Drills Off Korean Peninsula

Chinese Navy Begins Live-Fire Drills Off Korean Peninsula

Earlier this week, Seoul asked the US to delay joint military exercises with Japan until after the Winter Olympics, ostensibly to avoid provoking North Korea ahead of the 2018 Winter Games. The timing of the request is suspicious – having coincided with Secretary of State Rex Tillerson’s announcement that the US has offered to begin talks with the North “without preconditions.” While State Department spokesperson Heather Nauert walked back Tillerson’s statement the next day, insisting the North cease its weapons tests before talks can proceed, it is possible such a delay – if undertaken – could be construed as an opening gambit.

US drills in the region have stopped, though it’s unclear whether the US will abide by South Korea’s request. However, the brief lull in the area was interrupted Thursday when local media reported that China has decided to hold military drills of its own.

According to the South China Morning Post, China is now conducting a live-fire exercise off the North Korean peninsula, and is expected to last for four days. In addition to citing security concerns, Beijing also criticized the US for pushing the region toward nuclear war.

The drill in the Bohai Sea started on Thursday afternoon and will last until 4 pm local time next Monday, according to a notice issued by the Liaoning Maritime Safety Administration.

Beijing cordoned off an area of some 276 square kilometers near Lushun in Liaoning province, an important naval base for the People’s Liberation Army’s North Sea Fleet, which is responsible for defending the Bohai and Yellow Seas off the Korean peninsula.

…click on the above link to read the rest of the article…

Russia Rebukes US For Sowing “Regional Instability” As Military Drills Begin

Russia Rebukes US For Sowing “Regional Instability” As Military Drills Begin

The latest round of military drills involving the US, Japan and South Korea began their latest set of tracking drills on Monday, DW reported, citing sources in the South Korean military.

The drills – which are meant for “practicing tracking an object and sharing information on it among the three countries” – were being held in waters off the coast of Japan, according to Japan’s Defense Minister Itsunori Onodera.

The US and its regional allies are stepping up their military drills in response to North Korea’s decision to test-launch the Hwasong-15, a new ICBM that US intelligence believes has the capacity to strike Washington, DC, as well as nearly any other part of the US – though the degree of accuracy remains questionable.

In response to drills held last week, North Korea warned that it is “ready for nuclear war” with the US. Though its threats have long rung hollow, US, South Korean and Japanese intelligence officials say that the North might soon attain the ability to load a nuclear warhead on its newest ICBM, which would enable it to launch a nuclear strike – or possibly an equally devastating EMP attack.

The exercises are the sixth since June 2016. Two US ships and one each from Japan and South Korea are involved. Meanwhile, the US’s Terminal High Altitude Area Defense (THAAD) has been deployed in South Korea, infuriating Chinese leaders, who claim there’s little distinction between a missile-defense system and a missile launcher. According to DW, Beijing also worries that THAAD’s radar can peer deep into Chinese territory, compromising its own security.

Following the North’s November test, the US warned Pyongyang that its leadership would be “utterly destroyed” if war erupted. Since then, the Pentagon has staged several shows of force after North Korean military tests.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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