Their Recovery

As I often write, in Japan it is far more difficult to hide the failure of “stimulus.” There are varying degrees of visibility in that regard around the QE world, but they all share negative redistribution as the base alloy. That’s why Janet Yellen may be merely uncomfortable and Mario Draghi increasingly brooding, but Haruhiko Kuroda was just pushed to state already the obvious. Toward the end of last month, he finally admitted QQE wasn’t what it was supposed to be, though he was careful and as charitable (and passive) as possible with his wording.

“It’s not that the monetary base alone will pull up inflation or inflation expectations promptly,” Kuroda said in parliament on Tuesday. “We aim to raise prices through an increase in inflation expectations and a tighter gap in supply and demand under QQE,” he said, referring to qualitative and quantitative easing measures.

The remarks contrast with the optimism Kuroda showed as he began his record monetary stimulus program in April 2013, when he made a monetary-base expansion target the centerpiece of his strategy. Three years ago he said this tool was “the most appropriate” way to reach the 2 percent inflation goal and that “monetary policy alone” could achieve this.

Indeed, three years ago there was no doubt in his proclamations as to the power and fury of bank “reserves.” The initial statement in the official QQE document is explicit on that account:

The Bank will achieve the price stability target of 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) at the earliest possible time, with a time horizon of about two years. [emphasis added]

Not “wants” or “intends” but “will achieve.” That was certainly how “markets” saw it, still enraptured by the idea of “money printing” even if by April 2013 nobody was quite sure where all that “money” actually was.