woensdag 4 januari 2017

Japan Fiscal Situation 2017

The Ministry of Finance Japan has released a draft budget for 2017 and that report on the fiscal situation can be found here. I'll summarize my findings in this article.

The massive money printing from the Bank of Japan was started in 2013 and has continued ever since. It effectively increased tax revenues through a higher stock market and deficits turned into surpluses. It did bring in a lower yield environment to spur economic growth. The 10 year bond yield is kept at 0% through an unlimited buying program in November 2016 and interest payments have gone down because of that. But it also had adverse consequences. The yen plunged ever since that November announcement and the Japan stock market didn't go up significantly accounted for a weaker yen. When you take into account global bond yields are moving up, Japan could be getting into a lot of trouble if it wants to keep bond yields where they are.