1. We the Board Members setting monetary policy for the Bank of Japan elect 6-to-3 to leave the discount rate unchanged.
2. We reached this decision independently, based wholly upon the domestic economic data, and not upon whether free money (technical term= nearZIRP) is contributing to a negative real global rate of interest and global runaway asset-price inflation, or as a result of threats made by the LDP that BoJ Board Members voting in favor of a rate increase would find their children, and their children's children forever "unmarriable" within polite circles.
3. Board Members who cast dissenting votes are kindly asked to go to the mail room and retrieve a cardboard box and clean their desks out, and to leave the BoJ ID Badges and Luncheon Vouchers at the main security Desk.
4. All Gaijin desiring "free YEN", please queue at the first door on the left of the main foyer, and please have your suitcases or other form of portage ready.
5. Errrr. That's all.
(asset markets may now resume their ascent)
Meaning it's really just a soft yen policy?
ReplyDeleteYes, the enigma of Japaese power have consensually decided what is best for Japan, and for the moment it is a currency policy that insures the biggest customer continues to consumer, and that NOTHING is conceded to Taiwan, Korea or China in terms of competitive advantage. When the USA & EC (together) finally are ready to turn over the board, they will swallow their medicine, but Japan will be watching their neighbors to make sure they don't cheat. The bigger picture policy is not soft yen per se; this policy is hold-no-hostages victory in the commercial wars. In this sense, a weak yen serves their interests currently, but is not the endgame of policy. TeamJapan, I believe, is just looking out for #1. This is the cynics view, and many would argue otherwise. They would call me a half-baked conspiracy theorist. I would call them apologists. And so it goes.
ReplyDeleteEconomically 25bps makes no difference one way or the other to anything. It does however say something important IMO about who's dominant at the moment, and what little regard they have for their competitors.
The trouble with the cheap yen policy is that it makes export manufacturing more profitable to the manufacturers than it really is for the nation (since it is just an indirect subsidy). So businessmen build more capacity until the subsidized profit level declines to their target for investment returns. But inherent in this is that if the subsidies were ever to be removed, profits would decline to their unsubsidized levels, as margins would have to fall to keep the prices to the end purchasers the same and maintain the unit volume -- and if that would turn profits into losses, capacity would have to be scrapped down to whatever unit volume level would restore profitability. But of course that would cause unemployment and political unrest, possibly bankrupt crony businessmen, and expose the foolishness of the policies. So the exchange rate manipulation subsidies must continue forever.
ReplyDeletejm
jm
ReplyDeleteheaven help us all.....
-C-