I ask you: If Axel Weber says that the ECB policy (following today's discount rate rise to 4%) is "...far, far, away from being restrictive..." according to an interview today with Bloomberg's Andreas Scholz, then what pray-tell does this make BoJ policy (in respect to restrictiveness??
My guess is that this makes the BoJ's nearZIRP "far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far far away from restrictiveness....
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Actually BoJ is still draining reserves from the system, so in this respect it is running a tighter monetary policy than the ECB which has been expanding reserves at 10% or more
Anonymous,
I wont argue about the factual matter of the current reserve bias, but, does this matter insofar as the system remains so awash with reserves, such that the BoJs "tightness" is like bailing a boat full-'o-water with a teaspoon?
Rate policy (nearZIRP) and expectation (slowly slowly slowly) determines the extent of the carry trade, and retail capital flight, and so the extent of enabling leveraged credit creation both uphill and into higher-yielding EM units. I'm just arguing that these flows are cynically self-interested to prevent appreciation and as such in policy "rock/paper/scissors", interest-rate policy trumps reserve tinkering most of the time.
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