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Ever wondered what one quadrillion
looks like? Here it is: 1,000,000,000,000,000. This is the number that
Japan’s public debt is expected to have breached by the end of this
fiscal year in March 2012 – reaching 1,024 trillion yen (US$13
trillion). This is an increase of 99.75 trillion yen from the previous year, owing to the
reconstruction costs from the earthquake and tsunami last March, as detailed
at ZeroHedge.
Japan’s debt-to-GDP ratio
currently stands at 220% – the highest for any country in the world.
With all this debt, one might expect the Bank of Japan to have been an
aggressive money printer in recent years, in order to lessen the value of
this huge debt burden and to promote Japanese exports. But while the BoJ has intervened – fruitlessly – in the currency markets in
recent months and years (sometimes with the help of other central banks) in
an effort to drive the value of the yen down, as analysis
from the blog Gresham’s Law shows, the BoJ has in fact been
much more conservative than its European and American counterparts. In fact,
its balance sheet it still below the levels seen six years ago:
 
As Gresham’s Law notes: “This should be a bit of a clue as to why
the JPY continues its charge higher against the major currencies of the world
(in particular against the USD).”
So when you hear people state that the
risks of serious inflation as result of quantitative easing are
“minimal” because – supposedly – Britain, America and
other western nations are stuck in a “liquidity trap” akin to
Japan’s lost decade(s), one should be mindful of the differences in
monetary policy between these countries and Japan:
Even the supposedly uber-conservative Swiss National Bank has engaged in more
money printing in recent years than the BoJ. And
for all the talk about how the Germanic, hawkish European Central Bank is
crucifying southern Europe on the cross of a strong euro, as Detlev Schlichter highlights at
his blog, by the end of this year the ECB’s balance sheet will stand at
€2.4 trillion
– 20% larger than at the beginning of the year. Back in January 1999,
when the euro was first launched, this figure stood at just €690
billion. €690 billion to €2.4 trillion – a 348% increase.
As judged from the chart at the top of this article, the equivalent figure
for the BoJ from 1999 to today is around 70%.
Gold and silver prices remain steady,
though silver endured another rough day yesterday – at one stage
falling below $29 per ounce before recovering above that level during Asian
trading today. The gold price has broken tentatively above the
psychologically important $1,600 level, but given the weak volume in the
futures market at the moment this move could easily be reversed.
However, MarketWatch noted yesterday
that these price lows have encouraged physical gold buying in Asia:
“Combined turnover on the [Shanghai Gold Exchange] this week has been
consistently strong and is about 53% higher than the previous week’s,
while demand from India is shaping up to be the strongest weekly offtake since early October.”
Given this rising physical demand, the
gold price could surprise to the upside in the coming days
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