How much has Japan gotten out of 1.01 quadrillion yen of liquidity? A lot less than you’d think.
A quadrillion here, a quadrillion there, and pretty soon you’re talking about real money.
With apologies to 1950s U.S. Senator Everett McKinley Dirksen’s famous quip, this is very much the position in which Tokyo finds itself in the homestretch of 2023. Earlier this week, the central bank disclosed that over the last decade, it hoarded roughly 1.01 quadrillion yen worth of Japanese government bonds. And that’s not a typo.
We’re talking ¥1,000,000,000,000,000, or $6.7 trillion. This 16-digit haul means that since 2013, the Bank of Japan has purchased the equivalent of the combined gross domestic product of Japan, France and China. And what has this unthinkable sum bought Japan over the last decade? Surprisingly little, actually.
At this point, BOJ benchmark interest rates have been at, or below, zero since 1999. That was the year then-Governor Masaru Hayami took unprecedented steps to address a deepening deflation problem. First, the BOJ became the first major central bank to offer free money, essentially. And in 2000 and 2001, Hayami’s team pioneered quantitative easing.
Ten years after Hayami stepped down in 2003, Haruhiko Kuroda arrived at BOJ headquarters to supersize and turbocharge QE. And wow did he ever. By 2018, the BOJ’s balance sheet topped the size of Japan’s annual GDP, a first for a Group of Seven nation.
Kuroda has since left the scene, but the titanically large stockpile of bonds and stocks he amassed remain. And rather than reduce the biggest financial arsenal arguably ever amassed, Kuroda’s replacement Kazuo Ueda has stayed the path.
