Monday, February 12, 2007

The Secret Bank of Japan Lexicon

Verbal accuracy is a virtue in analysing and ultimately understanding international economic phenomena. The following lexicon should be of great value to earnest investors worldwide, especially those who take Media-speak, and bureaucratic Ministry-speak at face value.

ZIRP (c) - The policy of giving away free money in unlimited quantities to any and all comers, for the stated purpose of avoiding deflation, but actually for the purpose of insuring that the YEN remains weak for selfish, mercantilist purpose.

nearZIRP(sm)(c) - same as the above only a few basis points higher; ostenisbly meant to relieve pressure on the BoJ for the world's most FUBAR policy by creating the anticipation for a policy change that will always be "just around the corner".

ZIRPtastic - The feeling of joy and bliss that overcomes the borrower of "free money" upon swapping YEN paper for something with yield.

ZIRPflation - The internationally uncivic-minded side-effect of rising asset prices everywhere in the world caused - in reasonable part - by the unecessarily cynical & low discount rate in Japan and the unmitigated ability of foreigners to borrow as much as they want, in order to buy whatever higher-yielding, or greater capitally-appreciating assets they want. (See Private Equity, Hedge Funds).

disZIRPflation - The brave new world of very mild falling wage and goods prices in Japan (& Switz!) coincidental to ZIRP, nearZIRP, strongly rising asset prices, and massive demand for the currency to fund leveraged specualtive trades into higher-yielding currencies.

ZIRPulation - Leveraged specu-trage predicated upon borrowing YEN at nearZIRP for investment in anything and everything nonZIRP. Presumes continued weakness of the YEN and the dangerous belief that unwinding is possible somewhere near present levels as and when a paradigm short occuers (See "tail risk", and "lognormal")

ZIRP-sixed - Losing one's hedge fund by maintaining leveraged long YEN bets.

ZIRPcurve Risk - The aggregate embedded yield curve risk in a ZIRPified financial system where the paucity of short-end yield induces investors to "reach for yield" by going farther out on the curve, thereby squashing long-term rates towards ungodly low levels that circularly make it near-impossible to shift policy or paradigms without inducing massive mark-to-market capital losses throught the financial system.

ZIRPerrific - Peculiarly un-Japanese celebration of "High-fives all around" in the MoF & BoJ offices every time the YEN ticks new lows versus the dollar and especially the Euro.

ZIRPBento - The FreeLunch(c) Box served in the BoJ cafetaria, but available to any and alll comers.

ZIRPquake - Colassal dislocation in financial markets due to simultaneous attempted unwinding of ZIRP-related carry trades

neoZIRPantilism - Using all manner of monetary policy tools and jawboning about the same to insure that no one gets a competitive "leg-up" over TeamJapan. (See "Beggar-Thy-Neighbor";)

ZIRPing-on-a-String" - Economic state describing the ineffective outcome of employing ZIRP monetary strategies but to no avail, because the causes of Japan's disinflation has next-to-nothing to do with the price of money.

ZIRP-o-tility - The phenomena describing the compression of volatilty resulting from ZIRP and the flood of liquidity it spawns that have virtually eliminated risk premiums in global markets.

ZIRPocracy -Describes the paradoxical policy in capitallism where the market price is believed essential to the optimal, (or reeasonable approximation thereof) allocation of a scarce resource supporting privatisations, and market-pricing of utility services, but conveniently ignored when it comes to optimally allocating the quantity of YEN (or SFRs) in existence.

ZIRPlosion - - Eventual market explosion caused by any many manner of unwinding of speculative leveraged carry trades.


Anonymous said...

Brilliant, simply brilliant.
Now if you could just tell me when: how about we ask Marty?

debt is wealth said...


I submit that, in fact, the price of money likely has quite a bit to do with Japan's domestic stagnation: if all the smart money flees the country because the basis for returns is zero (ZIRPo?), that leaves only the dumb money to invest domestically.

And that seems like the wrong kind of selection bias to me.

I guess the test would be: does the Japanese stock market rally or crash when the interest rate is meaningfully raised?

Anonymous said...

You forgot a couple:

ZIRPgasm: shuddering climax immediately preceding ZIRPlosion

ZIRPilicious: BOJ theme song, song by Fergie of the Blackeyed Peas

Anonymous said...

Does Cassandra have an e-mail address ?

"Cassandra" said...

I can be hailed at and am diligent at replying to all non-abusive comments, (and occasionally, for sport, some of the abusive ones too).