Japanese Central Bank Nonsense Words

The Japanese central bank, the BOJ (Bank of Japan) now prints Yen in massive quantities in order to purchase Japanese bonds - a form of "QE" (quantitative easing). The result of printing massive amounts of Yen is that the value of the Yen has and will most likely continue to fall relative to other world currencies.

The U.S. government criticizes Japanese monetary policy, indeed warns the Japanese officials, that they must not cheapen the value of Yen in order to gain competitive advantage. No, they can only do so in order to spur growth of their economy. The head of the BOJ, Haruhiko Kuroda, responds to this:

"We have no intention to conduct monetary policy targeting the exchange rate," Haruhiko Kuroda, the new Bank of Japan governor whose policies have helped push down the yen, said in a Tokyo speech Friday. The BOJ's policies, he added, were aimed at pulling Japan out of its long slump and that "achieving this goal will eventually provide the global economy with favorable effects.

But printing mountains of Yen will, indeed, lower the value of the Yen. It will give Japan a competitive advantage. That advantage will - if all goes according to plan - create growth in Japan, as Japanese goods become cheaper on world markets.

Are you getting the sense that these guys are playing with words here?

Here's the response from U.S. officials:

The U.S. said it would "closely monitor" Japan's economic policies to ensure they are aimed at boosting growth, not weakening the value of the currency.

How exactly will they ensure this? And how is the result any different whether the primary "intention" is to spur growth or reduce the value of the currency? If a gourmand overeats consistently and they put on a lot of weight, would it make any difference if they told you their intention wasn't to gain weight, but rather it was to eat delicious food? They'd still get fat, wouldn't they? In the same way, printing mountains of Yen will result in the "fattening" of the total amount of Yen in the world, even if the "intention" of the printing is to spur growth. More Yen = lower value of the Yen relative to other currencies. The Yen will weaken and everyone knows this.

These words are all basically nonsense spit out by government officials for public consumption. Don't get sucked into the vortex of their swirling drivel. You'll just get confused, possibly even a headache. Heck, I can only read so much of this stuff before my head starts throbbing.