QE Singularity: No Japanese 10-Yr Bonds Trade

No Japanese 10-year bonds traded on Tuesday. The BOJ is in perfect control. This should be nirvana. Why Isn't it?

Japan has reached a state of QE singularity: Not a Single Japanese 10-Year Bond Traded Tuesday.

No buys. No sells.

Barclays Securities Japan rates strategist Naoya Oshikubo, summed it up, with perhaps an understatement: "the JGB market was generally thin."

Ridiculous Comment of the Day

"The upside for the BOJ is that with such little going on in the market, it makes it easier to control the yield curve, with less need for intervention."

No need for intervention? Excuse me, how is that not 100% intervention?

The Bank of Japan is an unlimited buyer at 0.11%. If the yield on the ten-year bond rose to 0.12% the Bank of Japan would rush in and squash the move.

What's the Message?

  1. That Japan cannot take interest rates higher that 0.11%?
  2. That 1 basis point on 10-year bonds matters?
  3. That Japan cannot destroy it's currency after years of trying?
  4. All of the above?

I Can Help!

Japan should stop mickey mousing around and buy all of the bonds. However, there may be reluctant sellers. After all, 0.11% for 10 years must be extremely attractive.

To make 0.11% less attractive, all Japan has to do is tax bondholders 1%. Bondholders would dump their bonds immediately, if not sooner, and the Bank of Japan would own 100% of them within a day.

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

Please click on the above link for further details.

​My Price

My price for this amazing plan is $0. It’s free for the taking.

Yet, zero seems woefully inadequate for such a brilliant plan that is absolutely guaranteed to work, especially when Japan has tried and failed for decades to produce inflation.

Thus, if offered, I will graciously accept $1,000,000 for each one-tenth of one percent rise in Japanese inflation if Japan simply follows my plan.

MMT Test

After the BOJ corners 100% of the bond market, it can cancel the public debt declaring it null and void. After all, the BOJ would truly owe the money to itself.

Next, Japan could hand out enough free money so that all private and corporate debt is cancelled as well.

This would be an excellent test of the MMT theories "we owe it to ourselves" and government spending does not matter.

Nirvana?

With the Bank of Japan in perfect control, the Japanese economy ought to be humming. So why isn't it?

Something seems to have gone seriously wrong with QE.

The US is on the same path.

Don't worry. Europe is sure to beat us to the door.

Mike "Mish" Shedlock

Comments (6)
No. 1-6
Latkes
Latkes

This post says that it was published 11 hours ago, but it just showed up for me now. What's up with that?

Latkes
Latkes

After the BOJ corners 100% of the bond market, it can cancel the public debt declaring it null and void. After all, the BOJ would truly owe the money to itself.

This is how it will likely end.

Latkes
Latkes

Also, re: " the Japanese economy ought to be humming. So why isn't it?" http://www.acting-man.com/blog/media/2017/11/5-Japan_gdp_per_capita_1994_2016.jpg

AWC
AWC

They still haven't tried putting expiration dates on even/odd serial numbered currency, but I guess it would take a lot of board feet on timber to print that many trillions of yen.

El_Ted0
El_Ted0

Japanese debt is a legal fiction; it's all yen.