The just released minutes from the March 16-17 policy-setting meeting by the Bank Of Japan indicate that dissension to global ZIRP, and its mutant step brother, Galactic Moral Hazard (we can't wait for Goldman to LBO Uranus, with $1 of taxpayer equity and a 0.001% perpetual PIK loan from the Federal Reserve), is growing: the vote to double the BOJ's 0.1% interest lending facility to Y20 trillion saw a final tally of 5 to 2, with two opposing. It is no surprise that as time goes by, ever more rational people will emerge at most central banks, and join such vigilantes as Tom Hoenig in expressing that extremely rare CB quality - unbribed common sense. Yet what is more notable in the last sentence is that Japan just increased the amount of funds to be injected to cover 3 month cash needs among commercial banks, and not only that but that the BOJ will also double the frequency of the new operation from once to twice per week. In summary: the fiscal tragedy discussed earlier by Koo is starting to once demonstrate the powerlessness of monetary policy when you are dealing with a defunct state. Yes America, this is coming here too. Here's why - the reason for all of this newfound excess monetary flooding: "To encourage a decline in longer-term interest rates." Because that is just what Japan need - more deflation.
In the words of the BOJ:
In December 2009, the Bank newly introduced a fixed-rate funds-supplying operation against pooled collateral (hereafter the fixed-rate operation) to further enhance easy monetary conditions, and has been implementing such measure to encourage a decline in longer-term interest rates. Given that the amount outstanding of funds provided by special funds-supplying operations to facilitate corporate financing will gradually decline from April 2010 onward, the Bank will expand the measure to encourage a decline in longer-term interest rates by substantially increasing the amount of funds to be provided through the fixed-rate operation.
And with the BOJ shows that once again the cause and solution to all of life's problems is simple: just print more money.
An amusing anecdote in the March minutes, indicates that even the BOJ now realizes just how hilarious any calls to central bank independence are. To wit:
Members discussed the Bank's communication to the public. Many members noted that, well before this meeting was held, there were media reports that the Bank was examining an additional measure, prompting various speculations in the market. Some members were of the opinion that media reports made ahead of the meeting and a consequent increase in market speculation might eventually undermine the credibility of the central bank's conduct of monetary policy, irrespective of whether or not the decision made at the meeting was in line with market expectations. Many members expressed the view that (1) monetary policy should be conducted solely based on the assessment of economic activity and prices in the medium to long term, and (2) even if the Bank made a decision contrary to prior media reports and market speculation, it could secure public confidence by clearly explaining its assessment of economic activity and prices and its thinking behind the conduct of monetary policy. Based on this discussion, members concurred that the Bank should be even more careful in its communication to the public.
In response to his observations, Tadao Noda, said it “might heighten the erroneous impression
that monetary policy had been strongly influenced by media reports and
thus have a side effect of undermining the credibility of the bank’s
He also said the expansion “was inconsistent with
the monetary policy framework adapted so far” and “such action would
have only limited effect in lowering interest rates and was unlikely to
have an announcement effect.”
Nothing like our own Federal Reserve perpetuating its insane monetary
policy prodded by the demands of certain so called economists, whose
daily appearances in the media do nothing but add more fuel to the bonfire which will result once the Fed created ponzi scheme known as the US economy falls apart.