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Japan is embracing inflation

For the first time in decades, the inflation rate in the US is lower than the inflation rate in Japan. After the collapse of their equity and Real estate markets in ‘89, Japan has suffered episodes of deflation, and its only now, with the advent of worldwide inflation as a consequence of central bank money printing that Japan has been able to register consistent and sustained positive price increases. As a consequence, the whole japanese yield curve should be yielding more, if it wasn’t for their Yield Curve Control, #ycc, where #boj is defending the 10y JGB and not letting it go beyond 0.5%. Debt to gdp in Japan is 226% and the only practical way to reduce that ratio is through financial repression, using inflation to reduce the real value of debt. The Japanese central bank is trying to thread the needle by keeping inflation high enough to deflate the debt, while controlling the curve to avoid skyrocketing interet expense, printing money to finance the process.

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