I think that information that Japan has to increase its money supply was not unique, but Japan regulator was not able to do so until recently for several reasons:
Japan had agreement with US to prevent artificial lowering its exchange rate. Japan economic miracle was based on artificial lowering of exchange rate, so increasing the money supply is one of the ways to lower the rate. After Japan in 80s agreed to stop lowering it exchange rate (under treat of sanctions), its economy stopped to grow. https://en.wikipedia.org/wiki/Plaza_Accord
“Yen carry-trade”. Carry trade is one of the most fuck up things you could do with your own economy. It is borrowing money in yens to invest them in dollar actives. Most Japanese wives are in debt as they do so, and they earn on it because of low interest rate and expectation of lower yen exchange rate in the future. It all resulted, however, in that yen rate behave counter-intuitively: it fails on good news and grows on bad. If increasing money supply is good news, it will be bad news for carry trade and bad news for Japan. https://www.cnbc.com/2016/02/11/yen-jumps-against-dollar-as-carry-trade-wanes-despite-bojs-negative-rates-policy.html
It all is probably much more complex than I remember from the time I was interested in the Japanese economy. However, it looks like the situation has changed recently:
1) Japan economic growth and export is not a problem now, as China now is the problem. So probably Japan got right to lower yen.
2) After 2008 US increased its money supply several times without damaging its inflation rate or interest rates, because it used Goldilocks principle. https://en.wikipedia.org/wiki/Goldilocks_economy Basically, all new money exactly covered bad debts on banks balance sheets and didn’t spilled much in the markets. European central bank did the same and it is not surprised that Japan did it too.
For one of this reasons, Japan central bank probably decided that risks of increasing money supply is worse a try.
This is how I understand it and I would like be corrected from the one who knows more about Japanese economy.
I think that information that Japan has to increase its money supply was not unique, but Japan regulator was not able to do so until recently for several reasons:
Japan had agreement with US to prevent artificial lowering its exchange rate. Japan economic miracle was based on artificial lowering of exchange rate, so increasing the money supply is one of the ways to lower the rate. After Japan in 80s agreed to stop lowering it exchange rate (under treat of sanctions), its economy stopped to grow. https://en.wikipedia.org/wiki/Plaza_Accord
Japan has largest public debt (200 per cent) with almost zero interest. Increasing money supply may increase interest and result in runaway collapse of debt. https://en.wikipedia.org/wiki/National_debt_of_Japan
“Yen carry-trade”. Carry trade is one of the most fuck up things you could do with your own economy. It is borrowing money in yens to invest them in dollar actives. Most Japanese wives are in debt as they do so, and they earn on it because of low interest rate and expectation of lower yen exchange rate in the future. It all resulted, however, in that yen rate behave counter-intuitively: it fails on good news and grows on bad. If increasing money supply is good news, it will be bad news for carry trade and bad news for Japan. https://www.cnbc.com/2016/02/11/yen-jumps-against-dollar-as-carry-trade-wanes-despite-bojs-negative-rates-policy.html
It all is probably much more complex than I remember from the time I was interested in the Japanese economy. However, it looks like the situation has changed recently:
1) Japan economic growth and export is not a problem now, as China now is the problem. So probably Japan got right to lower yen.
2) After 2008 US increased its money supply several times without damaging its inflation rate or interest rates, because it used Goldilocks principle. https://en.wikipedia.org/wiki/Goldilocks_economy Basically, all new money exactly covered bad debts on banks balance sheets and didn’t spilled much in the markets. European central bank did the same and it is not surprised that Japan did it too.
For one of this reasons, Japan central bank probably decided that risks of increasing money supply is worse a try.
This is how I understand it and I would like be corrected from the one who knows more about Japanese economy.