Thursday, August 14, 2008

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.


matt said...

I've been reading your blog for a few weeks now. You are a talented writer. Keep it up.

What does this mean: (and it IS a He)?

"Cassandra" said...

tnx...kind of you to say so. Despite whatever literary value it might have (and my opinion is beneath yours) it remains only just marginally less disposable (not to mention decidedly less useful) than "the Weather Report" since one is either right or wrong and once the front passes, no one cares.

As for the bracketed phrase, it was just a rather literal razz in regards to the apparent Japanese hesitancy to yield power to the fairer sex...

Anonymous said...

Matt, honey, this is fairly typical turn of phrase by the male bloggers on Japan to show that they can "reach out" to women.

As we all know, the type of Western man that ends up in Japan is so twisted (and ugly) that most sane women want nothing to do with them. So they learn to pretend to be sympathetic to the "fairer" sex by telling everyone how they notice how hard it is to be a woman, especially in Japan. They think it wins them some points.

Japanese women just don't buy, but simply overlook the nonsense for the sake of the green card. And as a Western woman who was charmed by it, it sometimes does work. But only for so long.

It begins to wear thin when you realize that you are not being treated as an equal and that you are expected to just be quiet and appreciate their brilliance. Worse yet your feelings just don't matter.

So in a word, Cassandra old boy, can the sensitive guy tripe. I can only wish being a girl on you.

"Cassandra" said...

???!?.....Ahem...and now back to our regularly scheduled program....

(longstanding readers will of course know Cassandra's firmly-held and frequently-reiterated belief that women are - in almost all ways - superior to men)

Anonymous said...

In almost all ways??

And anyway - isn't Cassandra a woman herself?

Charles Butler said...

Teiresias Does Tokyo?

"Cassandra" said...

Very funny Charles. Our "Cassandra" is a mere seer more on the mortally clairvoyant side (75% accuracy ratio avoiding the fat-tail events) than the prophetic with all its divinely-associated baggage.

Anonymous said...

Dear confused anonymous,
In the Greek tragedy, yes, Cassandra was a woman. But here again is another peculiarity of men who believe themselves superior to women but hide behind their false sympathy. They love to dress up as women! They love to pass as women! Dear confused, your blog writer is clearly a man. Yes, his "photo" is that of a woman, but it is damn demeaning and he thinks it amusing.
So all I can say is that I wish my cramps and panty hose on him.

AND Teiresias only had to endure 7 years as a woman, then it was back "normal." AND Cassandra was beaten and raped for her prophecies. Another good reason to avoid womanhood.

PS I do like the blog, but the pseudo-understanding of women crap has to go.

Anonymous said...

PS You may want to change your heading of one of the links on your blogroll. "PM Abe's Home Page." Huh? I guess you have been too busy being entertained by those BoJ minutes.

"Cassandra" said...

For the record: "Cassandra" has never actually possessed a gender. "She" is simply metaphorical for a reasonably accurate prognosticator whose accidental existence is owed to the fact that her forecasts were summarily ignored. "She" could have just as easily an innocently been Zoltar, Merlin, or Alexander . As it happened, for reasons and explanations that are private and that I do not owe anyone, a genderless "Cassandra" was most apt. "She" has never tried to be, nor impersonated a woman, (nor posed as a man), though "she" admittedly is a frequent lampooner of testosterone-induced bravado , triumphalism, dogmatism, and hubristic behaviour in financial markets and politics. If anyone believes that "she" is anything more or attempts to imbue "her" existence or musings as anything but genderless expression, they are sadly mistaken. "Her" image (i.e "Landlady" from Stephen Chow's Kung-fu Hustle) is accurate insofar as the author is a cantankerous, un-politically correct sort, who muses frankly, is suspicious of bullshit, but deep-down, possesses a good heart.

As for the aged-link to PM Abe's homepage, thank-you for highlighting this. I've intenionally left it to whither for I'd argue that Japan has been Prime-Minster-less since Elvis left the building, and will update it when a new Leader (upper case "L") emerges.

Charles Butler said...

Of course, had Cassandra boned up on her Etta James, she could have been Teiresias instead.

burnside said...

Oh great. First Yves is revealed to be a strikingly handsome woman where I had envisioned some suave mec, and now Cassandra selects ambiguity. It's a new century all right.

I wonder how BoJ might respond to uncongenial movements in FX/carry trade. Employ prearranged sign language?

Anonymous said...

Dear Vitriolic Anonymous - you don't seem to like being a woman very much - Confused Anonymous.

Oh "She Who Entangles Men" - what thinkest thou of the current dip in commodities? A temporary dip caused by a growth scare or the end of the bull run? Let the little snakes lick your ears clean and tellest me of what thou hearest.

"Cassandra" said...

(I assume you meant "me")

I think this is The Big One (deleveraging). I think we've bounced off the "LTC" (Limits to Credit) boundary and need to find a more comfortable spot in the continuum which requires credit revulsion and greater savings, both inimical to growth. As a result I think that decoupling is BS. I think it far-fetched to believe that either material or asset (real estate/equity) prices can endure deleveraging. The credit (inflation potential from monetarist perspective) is already out there. While potentially an issue, I believe more price destruction will occur, buffeting price stability. I do think that with population growth, climate change, unsustainable industrial farming practices etc. that the movement in Ag terms of trade is a long-term secular trend and its movement from historical lows has legs, and in any event its location at the trough was incongruous to the changing state of the world.

Yea, I think the inflation genie will be stuffed back into the bottle until some bottom on this cycle is found, and I think - economically speaking - we are still early days in the effect of financial deleveraging and higher taxes upon the real economy

el pollo said...

I think Cassandra has the right to be genderless if s/he prefers it. What does gender have to do with macro-economic analysis anyway? As to what aroused this thread, it's pretty common knowledge around the world that Japan is not exactly a bastion of woman's liberation.