Currently, everybody in Japan talks about “negative interest rate” introduced by BOJ. The point is nobody except for BOJ guys understands what it is and always stick to the following fundamental question: “Negative interest rate. Yes or No??” To grasp it correctly, you can’t miss the continuous dynamism the financial capitalism still shows. Introduction of negative interest rate as such isn’t an issue, even though it’s obviously capable of boosting asset bubble in the market. However, this is just the very beginning of the end game central bankers try to start.
As I referred previously, what they initially aim at is “negative real interest rate”. While nominal interest rate is pressed down, inflation rate is pushed up by QE of central banks. If central bankers succeed to do so, real interest rate becomes negative, which means de facto financial stimulus to make asset bubble happen dramatically.
Nevertheless, you may not relax without thinking of the very near future. As long as inflation rate rises, nominal interest rate has to go up step by step. This is exactly an abominable development for those advanced economies that have been accumulating sovereign debt, such as Japan. When they can’t afford to make any more payment of their own sovereign debt’s interest, what they can do is only to declare default. I personally suspect Japan will face such a tragic end of the game within a few years, maybe by 2018.
Of course, any central bankers do not want to be sacrificed as the cause of default. With so-called “global leaders”, they try hard to enable innovations to boost the global economy. Their streamline from Davos to G20/B20 is dedicated to this purpose. “Innovation” is the last key word which is left for the human kind, they believe. Based on estimate of the situation, I’d say the great period of innovation is finally coming, although it’s limited only till 2018 (or 2020). If we’ll fail to innovate both the human society and economy as a whole, the on-going end game will immediately lead us to the age of grand default on the globe.
In this regard, you may not forget the date of the G20 finance ministers’ meeting in Beijing, “26th and 27th of February, 2016”. The date should be memorized as the first page of both apocalypse and genesis of the human history. Stay tuned (At least, the Japanese stock market is to rocket dramatically from the next week. Watch out.).