According to an article published on the Wall Street Journal,"the economy doesn't necessarily get better just because of monetary easing," says Mr. Takeda. "And you don't borrow just because rates are low."
"The economy doesn't necessarily get better just because of monetary easing," says Mr. Takeda. "And you don't borrow just because rates are low."
"In this semi-industrial prefecture of 1.9 million midway between Osaka and Hiroshima, the dearth of borrowers illustrates the reality behind Japan's economic-policy experiment: It is easier to increase the money supply than to get people to put the cash to work".
The problem is more acute in regions like Okayama, away from the big urban centers and global companies that have driven the country's recovery so far.
But decades of shrinking demand and falling wages have spooked potential borrowers. As borrowing dwindled, financial firms put more money in the safety of low-yielding government bonds. Currently, Japanese banks hold around 142 trillion yen, or about $1.4 trillion, in government bonds—roughly 14% of the market—versus about 2% in the U.S.
Central bank has doubled bond purchases, buying the equivalent of 70% of new issues. It is an attempt to literally crowd banks and other investors out of the market and force them to put their money to work in other ways—through loans or investments in real estate, for example—to help stimulate the economy.
The move, though, is squeezing Japanese financial institutions, especially smaller ones, which say there is simply nowhere else they feel comfortable putting their money.
The tide of money released, along with fiscal spending, has weakened the yen, attracted outsiders to Japan's markets, bolstered exporter earnings and lifted some consumer spending—albeit much of it on one-off, feel-good luxuries. In the first six months of the year, Japan's economy had even expanded faster than those of its developed-country peers.
