BoJ Minutes

Nearly anyone who should be interested in Japanese monetary policy stopped reading the BoJ's minutes a long long time ago. For life is fleeting as best stated by Confucious' wisdom pearl: "Even the Emperor cannot take back one single day". That said, out of some erstwhile macabre fascination, I opened the minutes from their latest meeting, and would urge those who cannot find anything better to do while collecting UVs on their beach-of-choice, to have a gander - both for entertainment and personal edification.

The BoJ has been independent only since 1999, but after reviewing the minutes one would be forgiven for questioning whether this was in fact the case. The meeting begins with reasonably spartan Staff Summaries reviewing open market operations and recent developments in financial markets both domestically and internationally, highlighting developments in US, Euro zone, China and other EMs. They were sanguine about the domestic economy highlighting some price pressures (that put real rates into negative territory), but as always were quick to qualify this with expectations for moderation of the trend (else the staffer will be sent for a stint at the BoJ travel office, and be forced to make their own tea). Staffers were not referred to by name in the minutes.

Discussions of the Policy Board Members were then recounted. Members agreed (unanimously, of course) that 1) things would slow domestically, 2) despite positive growth, risks remained for the int'l economy; 3) credit markets remained strained; 4) US would remain weak due to negative feedback loop (perhaps the only perceptive comment in the entire minutes; 5) Euro area should continue to grow albeit at a slower pace; (huh??) 6) Global price pressures were demand led, from EMs (Hello Chindia!). "One member" (and we do not ever know who it is since they are always referred to anonymously lest they say something contentious that might threaten their ability to marry of a son or daughter to a 'good family') suggested that this would not abate until EM governments took appropriate policy measures (bravo! - but then it's always easier to criticize someone else...).

Fascinatingly, in making the suggestion that Euro area might slow, not a single member even mentioned that Euro-Yen rate, or that exchange rates might have something with anything anything nor was there any mention of trade surpluses, conveniently scrubbed to "export volumes" or "changes thereof". Inflation was a considerable topic of concern, discussing various causes, and likely outcomes, though despite such interest, concern was not so elevated as cause a single member to dissent, or seemingly suggest that real rates should be anything but negative. Carry trades and diminishing home bias of investors - either by global banks or the million+ FX day traders respectively were NOT mentioned anywhere.

Moving on to anonymously discuss the domestic economy, it was all benign and antisceptic talk that has no bearing on anything since no action would be taken, then back onto mild inflationary concern, and parroting Staffers view that moderation is near, along with other do-nothing justifications about Japanese exceptionalism with regards to growth-risks, and the adoption of a forward-looking, wait-and-see approach such that the unanimous result, once again, was to DO NOTHING, SAY NOTHING, CRITICIZE NOTHING

Then, in the final section, Don Corleone (The Ministry of Finance representative), whose been "observing" the meeting swaggers in to deliver his comments (and it IS a He), whereupon he listed four more polite suggestions as to why, Board Members, (presuumably under threat of being tarred, feathered and scarlet lettered), should refrain from taking any action, (else some unfortunate accident happen). These not-so-subtle suggestions were followed by Two-Yen from the Cabinet Office Representative also observing the meeting who (true to form) timidly suggested another four reasons for DOING NOTHING.

So in the end, unsurprisingly, the Board Members once again voted unanimously to DO NOTHING. While I am undoubtedly harsh, for this time, their hesitatancy might - for once - be justified, it should not go unoticed that an entire seven year business cycle of ZIRP and nearZIRP has passed with nary a peep from the BoJ. All which reminded me of the Galapagos Albatross, a large white bird with an unimaginably large wingspan, who returns to those islands for a month or so to breed, before resuming what is a year-long flight voyage at sea. These birds are so awkward and gangly that they actually need a running start to launch themselves off of a cliff to use the rising thermals in order to get airborne. But these Albatross, you see, are indecisive and apparently not very courageous. One can sit for hours and watch them milling about pensively and hesitantly before running to take-off, only and inevitably to chicken-out and abort when they approach the edge, after which they sullenly walk back to the beginning of their well-worn runway. They may do this a dozen times or more making the move, a record only outdone by that Albatross of central banks, the BoJ.