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The Next SNB? Goldman Warns Bank Of Japan "At Risk Of Losing Credibility"
Over the weekend, we asked rhetorically whether "The BoJ is The Next SNB?" after one BOJ official was overheard warning that "we have caused tremendous trouble for the financial industry," and many others growing anxious about continuing its massive purchases of government bonds and pressure from the financial industry is strengthening by the day "to scale back monetary easing soon." Overnight, it was none other than Goldman who reiterated precisely what we said, however when looking at the BOJ from the "other" angle - that of the central bank not doing enough to convince markets it will do everything in its power, i.e., print, until inflation is a "stable" 2%.
Here is Goldman's Naohiko Baba with why the "BOJ at risk of losing credibility over its price commitment"
The Bank of Japan (BOJ) kept its monetary policy unchanged, as we expected, at the Monetary Policy Meeting on January 20-21. Two noteworthy points from Governor Kuroda’s subsequent press conference were as follows:
1. The BOJ released its interim assessment of the October Outlook Report at the MPM, and sharply lowered its core CPI outlook – for FY2014 to +0.9% from +1.2%, and for FY2015 to +1.0% from +1.7% – reflecting the recent slide in crude oil prices. However, the BOJ maintains its view that its 2% price stability target is likely to be achieved by around FY2015.
2. The MPM did not discuss lowering the 10 bp interest rate on excess bank reserves, despite heightened expectations among foreign investors in particular ahead of the meeting.
We think the first point increases the risk of a loss of confidence in the BOJ. Like us, the BOJ expects a pickup in crude oil prices from midway through FY2015 and for this to result in renewed yoy core CPI growth. However, with the large downward revision to its core CPI outlook, the bank is more or less acknowledging a much lower possibility of achieving the 2% price stability target by around FY2015. Yet, at the press conference following the MPM, Governor Kuroda said he still held the view that 2% could be achieved by around FY2015. Domestic investors have been skeptical of the BOJ’s target from the outset, and now foreign investors are also beginning to question the BOJ’s logic and communication with the market. We believe the mixed signals the BOJ is sending may well serve to further undermine confidence in the bank.
With regard to the second point, we believe a thought process has taken place within the BOJ even if the latest MPM did not discuss lowering the rate. We think the bank has weighed up the costs and benefits of cutting the rate and ultimately concluded that 10 bp is necessary to maintain the existing quantitative/qualitative easing program under which it is effectively monetizing debt by purchasing close to 100% of newly issued JGBs.
We expect the feasibility of the BOJ’s scenario to diminish over time, prompting the bank to take further easing action once it can no longer put off the inevitable, either in July 2015 (when it releases its interim assessment of the April Outlook Report) or when it publishes the October Outlook Report. In our opinion, it is getting to the point where further yen depreciation and stock market gains are the only mechanisms that might allow inflation to move nearer to the 2% price target. However, with the bank’s hands tied in terms of accelerating the pace of JGB purchases, it may search for suitable alternative financial assets to buy.
Well, there is always crude, and both Putin and Maduro (assuming there hasn't been a military coup in Venezuela in the interim) not to mention countless shale junk bond investors, will be delighted by that kind of "out of the box" thinking.
As for the BOJ, it suddenly finds itself in a no way out situation: damned if it continues QE, and damned if it doesn't. How long until the "market" begins discounting this, and refuses to wait until the JPY becomes the next CHF? Because as so many FX brokers and their clients found out the hard way - it is always better to close short positions when you can, not when you have to...
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RISK???? RISK?????
A central bank that buys 100% of it's debt issuance - yeah that's credible...
It may not be credible but you must admit it is INCREDIBLE !! LOL.
Shit if all the other central banks fail with all the BS intervention, we should just move the citizens of every other country to the US! Everything is totally awesome here according to the asshole at the podium and schizophrenic market ;)
Follow anything GS says..... yea right. Don't get infected with the Goldman Crannial Anal Inversion Syndrome.
It's fucking hilarious!
It'll be even moar funny when the Feral Reserve starts running scared soon too!
He must be getting readied to be DSK'd (Dominique Strauss Kahn'ed).
Pencil necked academics clinging to their printing presses and Keynesian religion.
These Keynesian academics will deny failure of their system even if it's right in front of them.
They distorted it and twisted it to fit their needs. Greed is what destoryed the system.
Goldman huh?
Vampire Squid all worried about bankster credibility now....yeaaaaa...
Any word what Dick Fuld and boys from Enron think? Smartest guys in the room.....plus one.
BOJ had credibility? When, in the 1970's?
Time for Krugman to get another Goebbels prize
No doubt a BOJ failure will be responded to by Krugman with...."If only it was bigger"....
Central banks circling the credibility drain. Who will get "there" first?
The Bank of Japan cannot lose what it does not have.
But - a rising tide carries all boats, and the world's fiats are all starting to circle the drain.
Nothing to do but hope the Nips can still make the hell out of a fuck robot as they gradually become assimilated by China. After WW3, of course.
Which the US will lose the fuck out of.
[Hail Hydra.]
In the financial world, a rising tide only carries all yachts.
The working man carrying the anchors on the ocean floor aint gonna float any time soon.
A rising tide raises all yachts. I'm using that one, if you don't mind.
a solid point suely, and I think I understand the junks - my sloppy English. I didn't mean that in a Mitt Romney way, but in a - the world's fiat moves in the same ocean kind of way.
Every single fiat currency is in trouble - it is a systemic crash. It is the inexorable fucking pull of gravity, the falling orbit of heat death as chaos tips the balance over order.
From chaos, a new world order, and all, right?
Those crashing it surely expect to be the people to provide the "solution" to the problem.... but greed has a way of making one stupid, and many of the consequences will be unintended by them.
The only way anyones winning WW3 is by staying the fuck out of it.
I think the real lesson that should be learned(albeit too late) is that CBs need to get off their ego trip in thinking they are more powerful than natural market forces of supply and demand. They're pushing on a wet noodle
And pretty soon they will be going down 40 foot razor blades using their balls as brakes.
apropos of little - man with hole in pocket often come in handy....
If I were BOJ, I print like no tomorrow. They are already falling from the cliff, not reaching the ground yet. They may as well make it glory (and gory) like kamakazi.
Central banks should be printing to oblivion and purchasing gold and silver to launch New Yen/Pounds/Francs when/if the shit goes down, at the very least the soldiers will accept it. Buying government paper is fucking brainless.
irony = the squid prattling on about credibility
The Muppets love the squid....they think they're righteous dudes.
In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression. Today we have a similar debate over this. Anyone know what this is? Class? Anyone? Anyone? Anyone seen this before? The Laffer Curve. Anyone know what this says? It says that at this point on the revenue curve, you will get exactly the same amount of revenue as at this point. This is very controversial. Does anyone know what Vice President Bush called this in 1980? Anyone? Something-d-o-o economics. "Voodoo" economics. [/economics teacher]
The Laffer Curve. Hahah LOL. We need some voodoo economics right now. I bet voodoo dolls of Greenspan, Bernank, and Yellen would fly off the shelves and possibly even revive the economy!!!
a good reminder of megabank and hedgefund profits from central bank "dependability". and so listen to the butthurt choir of "but, but, the SNB did not warn us..."
quick, somebody call a waabulance for the butthurtz(tm)
for fuck's sake its just jargon meaning the bankers expect Japan to artificially create more debt to keep the global system going. Given the actions of the BRICs, and the Fed's own ineptitude over the long run, if Japan takes a giant shit the U$ will be punched square in the meat nuggets.
Mixed signals!? Oh, you mean the kind GS can't trade on in advance or against their 'customers'? Ah ha ha ha... FU GS!
If you really wanted to financially ass rape the most people you would set interest rates negative, the only way to make money is to borrow it and have them pay you for it. Credit/debt would get extended enormously. You would broadcast to the people your intentions of things going on like this forever. Then, with no warning, you would reverse course and buy up all the bankrupt people's stuff for pennies on the dollar.
ECB to do nothing!
Goldman Sachs is not one to talk.
Arrest Lloyd Blankfein for treason.
hank paulson, jon corzine, the list is EXTENSIVE
Include Ben Bernanke, Yellen, Evans, Dudley, Williams, Bullard, Rosengren and numourus others on that treasonous list.
Bohner pushed to have the recent bank derivative bailout passed.
When the largest looter in the room starts pointing his finger at one of his looting henchmen, it smells of canniballism. The Swiss were the smart ones... for now.
" We believe the mixed signals the BOJ is sending may well serve to further undermine confidence in the bank."
I am absolutely confident they will continue printing there fiat toilet paper.
What a watered down statement. Credibility is always at risk when making a policy decision. Goldmans next statement: everyone listen up, today is Wednesday.
Sending the BOJ a warning is like yelling into the loonie bin for demands on better behaviour.
What if, in some fucked up variant of the rapture myth - one day bankers- I mean real big wigs - start just disappearing.... called to grovel before Old Scratch Hisself...
That would make a great movie - maybe the Tylers crew could write up a sketch outline. One Day Blankfein disappears while pinching a loaf. Buffet disappears before a crowd of employees.... Jamie Dimon is seen to be swallowed up by the earth one fine day on the Vineyard.
Through the selective disappearance of perhaps 100 people, the country would swiftly improve. Sex would be better, beer more refreshing, and the excesses of white collar sociopaths would be tempered by a new fear....
That they are not, after all, safe, and that they are not, after all, anything like the Titans.
From the group that brought you such hits as, "Greeking Europe", "MBS, no really they're good, and " Hey Mr. Treasury man pay a trillion to me". That's not all, if you order today you get as a bonus John Coriznes "Commingle with me" and Lloyd Blankfein's very best "Doing Gods" work. So hurry up an order now and we'll throw in Mario Draghis "Is that a bazooka in your pocket" but you have to order now because next year might be to late.
Take a picture of yourself with the bazooka and something we can use for scale so we can be sure.
The most extraordinary thing about the BOJ - mind-boggling in comparison to other central banks - is that they publish the true numbers. They may be on the wrong path, they may be doomed to an implosion, but they will go out with an integrity that no Western economic institution can retain claim to.
I'll grant you that harakiri requires a certain level of determination, but I'm not sure doing so before the battle is considered bravery.
IMHO, Japan's primary problem is a scarcity of youth in the country. Japan doesn't allow for any immigration and people don't reproduce. As much as I hate to use taxing authority to spur on social change, Japan needs it bad. Japan needs to provide all the bells and whistles that encourage reproduction---child care, time off, and generous deductions, or even tax credits for child rearing. With a new generation of Japanese, there will be new demand that just doesn't exist with old people. Its with that demand, inflation will come back.
Those "bells and whistles" that you list have not induced Europeans to reproduce. Reproduction is not about economic bribes; it is about hope for the future. Japanese people have a distinct lack of hope due to living in a deeply corrupt society. Plus there is that little Fukushima thing; if I were a Japanese woman it would make me think twice and than twice again before reproducing.
... suddenly, the squid has an inkling that the BOJ has credibility ... it was like a japanese expression of love with a double entendre ... I wirr rob you very much ...
The US follows Japan.
Japan has been coached by the US Federal Reserve.
A bunch of Federal Reserve PhD academics drove Japan into enormous debt. Print till they die, just like the US.
<--- Real credibility
<--- Fiat credibility
GS and credibility in the same sentence is absolutely hilarious.
If you have no credibility can you still judge the credibility of others?
what's all this shit about inflation, and unemployment?
the govt.'s are taking away from inflation, (cpi), and adding it to gdp, so inflations there, but hidden, making way for more govt., printing, and eventual takeover.
the govt. doesn't count people unemployed after so long of a period, so their not considered unemployed.
the govt.'s economic policies have failed, their down to look over here, then tomorrow, no look over here, keep moving, it's makes your failed policies harder to zero in on.
like I keep saying, the gruber's aren't an aberration in govt., they are govt..
I just can't keep from picturing in my mind when these bankers talk, the vast majority of them have went through their whole lives as 1%ers., this means they were reared, and schooled, not to have to do any labor.
all their schooling consisted of was, it is who you know, not always what you know, and make money off other peoples labors.
credibility is not a word i would use when talking about bankers.
none of them are credible.
and if GS thought that the BOJ was credible to this day then i know that GS is incredibly uncreditable.
Banks losing credibility? Now THAT is funny, I don't care who you are.