Toshio Masuda

Toshio Matsuda, Commentator & Intl Economist

Straight from the Shoulder

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(This issue is submitted to a Washington D.C., Seattle, and Zurich think-tank as the English edition of “Straight from Shoulder”.)

"Straight from the shoulder " by Toshio Masuda September 20, 2016
( Free of charge to the people I met)
I am so glad to have been given this opportunity to make my presentation to all of editors today.

I am a descendant of one of 47 samurai in Japan.
I hope you know about the story of 47 Samurai or Ronins.
If you want to know , I will explain about it to you later after this.
Let me explain how important FX (Foreign Exchange) is to the world economy.
The living standard of advanced nations has reached to the highest level now and there is no room to go higher.
So, the balance of Supply and Demand has been kept zero or negative.
After Lehman Brother’s shock, the deflation was so escalated and the
recession looked lasting longer so FED alone decided to start QE Oct. 2008, keeping JOB and ECB stay with no move until FED recognized US economy’s back to the normal condition without QE.
At the beginning of 2013, FED announced that it would start the tapering in the year and actually started it from the end of the year.
That means US economy was revived back to the normal and self sustained
condition by 2013.
Before BOJ and ECB were allowed to go in for QE, US dollar had been kept lower to both Yen and Euro.
There is no doubt that the advantage of the lower currency value of US dollar was a major reason of the revival of US economy.
In other words, the win win game of US economy was made by the sacrifices of Japan, Europe and other economies.
So, April 4, 2013, JOB stared QE and ECB followed.
Chinese economy went on the same with US economy
as Yuan Renminbi (CNY) is pegged with US dollar.
Since JOB and ECB started QE, US dollar went up and Yen and Euro went down.
Dec. 2015, FED raised interest rate and Yen and Euro went down a lot, like
yen marked as low as 123 yen to US dollar.
US and Chinese economy started to suffer from the high value of their
currencies and the risk of recession were viewed in their fundamentals.
So, a certain adjustment was needed among US, Japan and Europe.
On Feb. 26, 2016, what Mr. Jim Rickards called Shanghai Accord like Plaza Accord of 1985, a kind of Manipulation Agreement was set up.
Having both JOB and ECB go on QE, while they were
manipulating Yen and Euro to go high against US dollar.
The most important purpose of the monetary policies of
JOB and ECB of raising the inflation rate up to 2% was
now failed.
FED is now at a loss if they should raise the interest rate again in Sept.
To raise the interest rate is to stop the further growth of US economy and
push down the still weak economies of Japan, Europe and others.
FED is stuck in dilemma and BOJ and ECB got in the limit of the monetary policies.
Thru the former G20s, Prime minister Mr. Abe announced his 28 trillion yen public investment plans and he kept urging other advanced nations to follow Japan.
But they wish they could because of the lack of the funds available.
Japan’s fiscal condition is the worst in the world, 240% per GDP and the fund available now in the account of the Treasury Ministry is only 5 billion yen, almost nothing to cover Abe’s plan.
Japan looks like the last nation to go in for any public investment.
To the market surprise, on the very day when Mr. Abe government approved the 28 trillion yen project, Yen went up against the market’s expectations.
Any people who has the common sense on the economy in general could not understand what is happening in Japan.
Japan is called Zombie, supported by the unknown.
Mr. Abe’s 28 trillion yen project could not be paid except by what is called the helicopter money.
Let me explain the secret privilege of Japan in the fiscal budget compared
to other advanced nations.
It comes from the fact that 100% of Japan’s debts are owned and held by
Japanese people.
At any of the bonds auction, Japanese banks representing Japanese people’s money of equivalent to US$16 trillion cash savings always rush first to buy any offer of “To buy is to lose” bond for sale.
Always 3-5 times strong buying power.
This trend of auction has never been changed ever since it started!
For Japanese, to save the money in the bank is not an investment but the substitute for the safe box.
If the deposit is charged any by the negative interest rate, it is considered for the fee for the safe box.
That is why the amount of the deposit was increased to cover the less interest gain caused by the introduction of BOJ’s negative interest rate whose purpose is to urge the saving to move into the investment.
Only Japan in the world has no problem for the helicopter money policy.
Mr. Bernanke former chair of FED came to see Mr. Abe August 11 and
suggested Mr. Abe for the future helicopter money policy and even the
perpetual bond. He confessed , “Mr. Abe, I envy you”.
Any nation in the world wish it could.
If FED goes in for the helicopter money policy, China, Saudi Arabia and others will sell off US bonds resulting in hyper-inflation in US.
The strength of yen is based on the fact that Japan’s debts are 100% owned by Japanese.
Only Japanese government can issue the bonds as much as they want as there is nobody in the world who will sell Japanese bonds.
I hope Japan leads other advanced nations and others by leading Japanese economy to the long lasting heathy bubble for the nest year to come.

My last prediction on the stock market for this year:
NY market would be crashed before Nov. 8.
In order to make any growth in this stagnant economieas in the world, the
only and the last measure to do is to apply to the principle of Scrap and Build.
Without any hope of the monetary and fiscal policy, now is the time to scrap
it and build it.
Mr. Trump is Mr. Scrap, he is on the wave to the right trend.
No country has any money to rebuild it after the crash.
Mr. Abe with 28 trillion yen or more if he wish that you cannot afford is one step ahead.
After the NY crash, which do you think you should buy, the rising Sun of
Japan or the Moon of US to follow to go around the Sun?
God bless you

Toshio Masuda

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