Friday, June 15, 2007

BoJ Employment Exam Exclusive!

Through secret channels and connections, Cassandra has managed to get hold of a highly confidential exemplary employment examination for entrance into the ranks of one of the world's most important financial institutions. Here it is revealed for the first time giving insight into the methods used to select some of the world's most influent bureaucrats!

** BoJ Employment Examination **

This test is intended to test your aptitude for independent thought. Please complete the entire examination

Question #1: - What, in your opinion, is the primary purpose of Central Bank Policy
(a) further the mercantile interests of Japanese businesses
(b) protect Japanese employment
(c) make sure the exchange rate doesn't rise
(d) shadow the RMB like a hawk
(e) do not upset anyone in MoF or Keidanren to insure good retirement job
(f) all of the above

Question #2 - Imagine your advising the BoJ Governor on interest rate policy. The economy is doing well. Real estate prices and the stock market are booming. Unemployment is near historically lows.
Deflation is past. Import prices are rising. What policy do you recommend to the honorable Governor?

(a) keep rates unchanged.
(b) do not raise rates
(c) urge him to make a statement saying rates will remain unchanged
(d) send SPAM mail to analysts saying rates will remain unchanged until the next ice age
(e) all the above
(f) other

(warning - if you selected "other", please refrain from completing the exam and exit immediately)

Question #3 - Complete the Following Sentence as best as possible
"The Bretton Woods International Monetary System" is...

(a) to be treated with the respect accorded to Korean comfort women,
(b) only to pay lip service to so long as it serves our interests
(c) dead, and if it's not, then let's put it out of its misery,
(d) an instrument of US economic hegemony, to be fought stealthily for the day that like a phoenix we will....
(e) wonderful for Japan, so long as we disregard its spirit and central tenets
(f) all of the above

Question #4 - In public a appearances a representative of the BoJ must never:

(a) admit there is a weak yen policy
(b) say anything that might be contrary to weak YEN policy,
(c) point out that US tax receipts are about 3% of GDP too low
(d) speak poorly of Dr Sakakibara-sama
(e) never overtly disagree with any from the US FRB or US Treasury.
(f) all of the above

Question #5 - What are the prime motivations of ZIRP and nearZIRP for BoJ?

(a) keeps our currency weak for mercantile advantage
(b) insure no difficult political decisions on fiscal policy are required
(c) allow the families of BoJ Governors and employees to marry well
(d) postpone the day when the slackers day-trading FX might have to go out and find useful employment;
(e) assist the global dominance of Japanese MNCs

Question #6 - When asked about the BoJ's Accumulation of USD Reserves the correct response is

(a) "reserves?!?! what reserves?!?"
(b) "the US is the best place on earth to invest (and the women are so pretty!)"
(c) "What's with the racist Japan-bashing? PBoC, and GCCs own way more than us....."
(d) "You should direct your questions to Prof MacKinnon"
(e) "We are saving up for a retirement holiday"
(f) "We keep our friends close, and our enemies closer"

Question #7 - In advising the Governor on responses to leveraged speculators borrowing yen to fund carry trades, what advice would you give him?
(a) Encourage Japanese pension funds to invest in hedge funds to insure new equity for more leveraged carry trades
(b) The market's estimates of the carry trade are ALWAYS overestimated
(c) Advise Japanese banks and insurance companies to Sell Yen Puts. We can always rescue them with unsterilized intervention whenever we like.
(d) Start a Macro Hedge Fund themselves
(e) All of the above

Question #8 - The inflation rate is beginning to rise. What policy responses are available to the BoJ?

(a) distribute wheel-barrow vouchers to all households
(b) keep rates unchanged.
(c) do not raise rates
(d) jawbone saying rates will remain unchanged
(e) denial denial denial that inflation is incipient

Question #9 - Your trading partners are getting seriously pissed off at you. Ten YEN is dropping like a stone, even against the pathetic USD, and your bilateral surplusses with other OECD nations are soaring. What should you do?
(a) keep rates unchanged at nearZIRP
(b) conjure up the deflation boogie-man to justify current policy
(c) tell the market that "the BoJ is considering studying the possible change of policy once the preliminary implications of policy changes are evaluated"
(d) tell the market "we believe in free markets and do not wish to distort them by enacting polcies that might distort them [further]". And point out that deflation is not yet whipped.
(e) Highlight the coming demographic challenges facing Japan, and the need for lots of savings to insure their well-being, and policies that might do otherwise would be unecessarily harsh upon kind defenceless elderly people.

Question #10 - What is your opinion on Overt Official Intervention in the FX markets
(a) Highly recommended in a crisis, or nearCrisis
(b) OK, but only on Mon, Tue, Wed or Friday.
(c) Only if buying other ccy vs. YEN - never sell!
(d) Always a useful and important tool.
(e) to be used only when the market is heavily long YEN, or when the YEN is moving up, or to insure that the YEN is not moving up too fast, or to insure that the YEN doesn;t move up at all - especially during March or Sept book-closing time.

Congratulations! You are now prepared to enter the Japanese Civil Service! Please return your examinations and insure that your views NEVER deviate from those of The Team.


James said...

Do you think Macro Man is correct and at some point we are going to see some currency and financial market warfare? I thought the actions out of New Zealand where interesting and perhaps the first shot across the bow. If I was Pollard I would be getting increasinbly frustrated watching the yen this week. Japan is going to wind up pissing alot of other CB's off

"Cassandra" said...

Heck, though since 2003 I've thought protectionism was the end-game, what do I know? I thought that by now the US would have had tariffs upon Chinese imports; that the Treasury Sec would have (again, like Rubin) been dancing all over the Gov of BoJ in the US national interest; that the Europeans would have long-ago placed pecuniary NTBs upon Chinese imports (like they threatened did last Xmas) and would gave been downright frosty hostile to anyone and everyone officially Japanese .

Instead, the YEN is the weakest currency in the world save the Rhodesian Turd, Chinese surpluses are rising by leaps and bounds vs. Europe without a peep, and not only has there yet to be a "carry accident", it seems anyone who DOESN'T have carry trades on in spades or a YEN or Swissie Mortgage for their Croatian island is Stupid Sap if ever there was one.

I think that until global players agree on some rules to tame the leveraged specs and real hot money flows, the only way to insure you're not run over by the market is insure there is no trade for them. If this means higher taxes and lower interest rates, to find the right balance that doesn't wave the red cape at the specs, or something like capital controls to keep them at bay, ugly as it is, then so be it.

MAD kept the nukes in their silos. With the scale of the dollar holdings and imbalances, there is a sort of financial MAD that might preclude out-and-out warfare, for now.

I just wish someone would raise taxes, especially the highest marginal brackets and impose both energy taxes and VATs - in the US, for lord knows they need. This would go a long way towards mending the biggest bubble of all (next to the Art Scene), which is unsustainably gluttonous American consumption.

Anonymous said...

On who's carrying whom in the NZ case. Did someone say monetary policy? May it apply in the others?

Anonymous said...

June 18 (Bloomberg) -- Japanese businessmen, housewives and pensioners betting against the yen in their spare time are wrecking the forecasts of the world's biggest currency traders.

The yen has slumped 4.6 percent to a 4 1/2-year low against the dollar this quarter, making it the worst performer among 72 major currencies and confounding predictions by strategists at Deutsche Bank AG and UBS AG for gains of about 1 percent.

The banks didn't reckon on the risk appetite of Japanese individuals, who are borrowing money like never before to buy currencies with higher yields. They tripled their trading in the year ended March to a record $11 billion a day, according to Tokyo-based Yano Research Institute Ltd., publisher of an annual report on the business. Globally, currency trading by retail investors rose 54 percent in 2006, according to research firm Greenwich Associates in Greenwich, Connecticut.

"Cassandra" said...

I saw this Bloomberg article last night and had a real laugh. Reminded me of these commercials on BubblevisionTV with a former Laundry-Room mom turned day trader sitting with her friend at a lunch counter using the ketchup bottle to demonstrate how easy it is to make money. "Just buy low and sell high" she would using the squeezie bottle of mustard to define the channel and ketchup for the price action... "and Channeling Stocks.Com will tech you how...."

Ignorance is indeed blissful...until your stops are triggered umpteen times in succession and your trading account P&L makes Richard Dennis look like Paul Tudor Jones and your husband divorces you for pissing away all the money, taking the kids with him, while SHE ends up trading her foodstamps for crack in a crackhouse. Isn;t life wonderful?

Macro Man said...

Remarkably, as I was reading these comments, I received a Bloomberg message from an investment bank entitled "Bank X flow monitor: record short USD/JPY positions." Another large bank has short USD/JPY as its only trade reccomendation in its flow analysis product (which goes with the flow, so to speak.)

So while Mrs. Kobayashi may indeed come to a horrible and penniless end, it seems as if the "smart" guys might need to get fired first.

"Cassandra" said...

I hear you. And it all comes back to ZIRP, & near ZIRP. Normalise rates and most of the capital flight and leveraged carry disappears, much like the genie gets sucked back in to the bottle. Surpluses still need to be recycled, buts a whole lot more manageable (maybe even - bite my tongue, - almost sustainable) if they are not pushing in the queue throwing elbows in the trade with capital flight deterred by non-existent or ultra-low YEN interest rates, and all manner of international leveraged spec conjuring liquidity from the fractional reserve banking system expressly for such purpose.