What seems to have gotten lost in translation very rapidly is the appreciation of how big the gamble is that Japan is taking. And even more how desperate it is. Abenomics is a bet on perception, the perception that Abe and Horuda have control over – virtually – all aspects of all possible outcomes. They do not. As a matter of fact, they have pushed themselves, and their people, into a “doomed if you do, damned if you don’t” quandary.
If they should somehow manage to achieve that 2% price rise, they will lose control over interest rates no matter what they try – it would simply be the price to pay – most harmfully of all those on Japanese sovereign bonds – JGB -. And if the opposite happens and prices don’t rise, well, the markets will come after those bonds too.
Read the complete article at The Automatic Earth here.
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