Wednesday, September 19, 2007

BOJ Action Note

Humble and self-effacing are the Japanese, never wanting stand-out or upstage those in the limelight. This is no better exemplified than the US FOMC's [reckless, feckless, bold, decisive, munificent, stupid](please choose one of the preceding) decision yesterday to slash rates by 50bps, which was followed today, by the BoJs [spineless , automatic, expected, cynical, prudent, lame](please choose one) decision to leave the official lending rate unchanged at 0.50% [yes, that's one-half-of-one-whole percent or in English, almost free]. In case anyone had any prior doubts about what the decision might hold, I offer you a photo (see above left) from the Official BoJ Press Conference that (almost) no one attended, not least The Press who were otherwise engaged on more important matters covering the monthly executive meeting of the Association of Shibuya Flower Arrangers, and the opening of a new Mosburger outlet in Toshima ward.

But The Press who've been preoccupied with the US Federal Reserve Bank's decision, and fawning over Mr Greenspan who has miraculously given no less than 241 interviews during the past two weeks (that's 17.2 per day! not bad someone > 100 yrs old!) paid for their myopia and missed the scoop of the day which was the BoJ's announcement that current Toshihiko Fukui will be stepping down, and , will be replaced by none other than Honda's "Asimo" (pictured right). MOF officials expressed their regret, widely citing Mr Fukui as being "The Greatest & Most Effective BoJ Governor The MoF has ever had!", citing the fact that he did absolutely nothing since his election in 2003, ALWAYS picked up the tabs for lunch for his mates, AND contributed to the disposal of that nuisance Murakami. Looking forward, officials said that Japanese researchers had been working very hard on Asimo's neural net softwarre programming. They highlighted that Japan's monetary policy could be run by a fish as well as a robot, but Asimo has mastered the art of vaccuuming the office floor as well as signing his name upon restaurant cheques, so that he may continue the tradition of picking up the tab for Japan's ill-conceived industrial policies.


blogdonuno said...

Thank you for the news Cassandra.
And i think Asimo will not fail, in continuing the job of Mr. Fukui.

Anonymous said...

Hypothetically - what would happen if Japan raised its interest rates overnight to, say, 4%?
Yes, for say 2-20 yrs there would be problems/mayhem, but in the end they would be able to get back to a normal(ish) kind of economy. Basically, as you so rightly pointed out, BoJ could be run by a fish at the moment!

tariq said...


one of the things I've noticed is a number of value investors pouring into japanese consumer lenders which have beaten down share prices and some trading below/close to book value. the thesis is that they feel there will be some kind of consolidation in the industry which will benefit the larger players. I wanted to get your opinion on the likelihood of this kind of shift happening, especially in the near future.

"Cassandra" said...


Nice of you to consider I possess such insight, but I fear you are confusing "a Cassandra" with "the Delphic Oracle". "Cassandra's" generally demonstrate their worth on big picture stuff, while Oracles render more precise detail-oriented forecasts.

Funnily enough, I personally mirror this distinction, being rather poor tactically, though reasonably prescient on the Big Picture.

That said, I of course am as opinionated as the next Cassandra, and I will admit to being a contrarian at heart. SO what are the positives? 1. Everbody hates them. They're way south of stated book. People have already puked them. Short interest is very high. The bad news (excepting insolvency) is out. They are trading at heavily discounted ratings. A few deep-value investors (Brandes etc.) are taking down stock [somewhat painful ly I would add]

The negatives? No one knows what their book value actually is, or earnings wil be. The shorts might [continue] be right. What will, happen to them when the US transmits recession all-around? Bankruptcy (like Credia) remains a possibility for some.

So: they are shrinking, have huge uncertainty, few buyers, might be insolvent, and all they going for them is that they MIGHT be cheap.

Now personally, given where rates are, I would rather own cheap regional banks at 10 to 13x f'cast earns and 0.7x book with no growth, collateral vs. loan book, who've already spent a decade writing off bad credit, than be too early on something enroute to ignominimy, where loans have no collateral, and the global trend increasing inequality driving such borrowers to borrow continues be exacerbated, which rather than being a boon to business growth, I see as negative to future repayment quality.

I used to laugh at guys who said "I'll leave the first 50% on the table", but in this case, with the outcomes binary, I'll leave the first 50% on the table chickenshit that I am thankyouverymuch

Anonymous said...

Ahe the currency wars now on?