138 THE BiG DROP
is heading down a one-way path toward currency destruction...
My work on central banks and currency wars indicates
that the yen will keep weakening against the U.S. dollar in the
coming months.
Kuroda is a zealot in his belief that the can revolutionize in-
flationary psychology in Japan. He took the helm of the BOJ in
early 2013, vowing to boost inflation and inflation expectations.
He immediately launched the largest quantitative eas-
ing program the world had ever seen — twice as big, in GDP
terms, as the Federal Reserve’s QE3 program. The BOJ pledged
to purchase $1.4 trillion of Japanese government bonds over
the course of 2013 and 2014 using printed money.
“[The] Bank of Japan was explicit about its goal to increase
inflation in order to increase nominal, if not real, GDP,” I wrote
in The Death of Money. “The BOJ explicitly targeted an infla-
tion rate of 2% ’at the earliest possible time.’”
Kuroda is increasingly desperate. The prior plan to inflate
Japan’s base money supply wasn’t shocking enough to boost in-
flation expectations. So Kuroda sought an acceleration in yen
printing, got the votes and announced the policy shift on Oct. 31.
The Bank of Japan is so far down the road to currency de-
struction that it’s now the only sizeable bidder in the Japanese
government bond (JGB) market. JGB trading volumes have
collapsed. With Japan’s shrinking workforce, declining compet-
itiveness and a national debt that requires near-zero interest
rates, more and more of the JGB market will be converted into
cash deposits. The yen-based money supply will keep growing.
Why is Japan’s debt a problem if the central bank stands
ready to convert the entire stock of debt into yen?
Here’s why: It’s only a matter of time before the supply
side of the Japanese economy starts viewing yen as hot pota-
toes to be traded for real assets — a spiraling inflation crisis
that the BOJ won’t have the flexibility to fight.
Currencies die quickly when producers lose confidence