Furthermore, under the leadership of Governor Haruhiko Kuroda, the BoJ is buying about $83 billion in bonds per month, a quantitative easing program equal in size to that of the U.S. Federal Reserve’s Q3 at its peak—except that Japan has an economy one-half the size of the United States.
Nevertheless, the IMF warned: “The BOJ needs to stand ready for further easing, provide stronger guidance to markets through enhanced communication, and put greater emphasis on achieving the 2% inflation target.”
Fair enough. Maybe the BoJ needs to really pour it on.
Umm.. What About the Fed?
So the United States posted Q1 real GDP dead in the water, and many are forecasting Q2 not much better. The core PCE deflator is now running at 1.3% YOY, with headline deflation. And the Fed has not reached its 2% inflation target for seven years, except once, and that fleetingly. The U.S. producer price index has been in deflation for several months. The U.S. unemployment rate is 5.4%, and a squishy figure at that.
Yet Fed Chair Janet Yellen never misses a chance to rhapsodize about raising interest rates, and on May 21 warned that the Fed cannot wait too long before tightening the monetary noose or it will “risk overheating the economy.”
BTW, also from the Fed: “Industrial production decreased 0.3% in April for its fifth consecutive monthly loss.” Capacity utilization is at 78.2%, below the long-term average.
Yellen has a new definition of “overheat,” and that is any room temperature warm enough to melt ice cream. And the IMF…well, what can you say? They appear seriously confused.