I guess the question is who do the banks buy these bonds from?
It could be straight from the government (which is where there originally come from anyway). It then depends what the government does with this money... it currently spends it on wars abroad etc... that contributes to inflation insofar as the money gets dispersed throughout the military industrial complex. Note that Japan's government doesn't have anything like the US military expenditure... which might be one reason why the analysis in the bloomberg article could be flawed. But the government also has to fork out 700 billion to bail out the banks! But something here doesn't make sense... the government issuing 700 billion worth of bonds to finance the banks - the bonds themselves being purchased by the banks? If this makes any sense at all it is just the money going round in a circle... so this would be deflationary.
If the banks buy the bonds on the open market, they are presumably dispersing the money outward - this should be inflationary.
In any case - if it points to deflation... then the gold bugs are wrong and gold is heading south.
It's just so hard to bloody tell. None of the analysts agree on anything.
