A "Baffled" Bank Of Japan Is Shocked By Its "Message Of Despair"

Tyler Durden's picture

One look at Japan's bond yields, which moments ago hit a fresh record low for the 20Y maturity as the curve slowly but surely inverts...


.... and one would think Haruhiko Kuroda would be delighted.

After all, when he launched NIRP three weeks ago, a world in which negative rates are now a reality, it should have been clear to everyone even children, that yields would collapse as the scramble for any positive yield was unleashed.

The only problem is that Kuroda did not care about yields - positive or negative: what he wanted was to crush the currency and to send the Nikkei soaring - the only two actual "arrows" of Abenomics. Sadly for the BOJ, this time it failed as precisely the opposite of what was expected happened.


But, as the WSJ wrote earlier today in an article explaining why the BOJ is baffled (at least before a call from the BOJ forced it to change the title to the far more politically correct "Bank of Japan Faces a New Opponent on Negative Rates: Main Street")...


... Kuroda's confusion has nothing to do with the market's reaction; it has everything to do with the reaction by the public.

An appropriately very negative reaction.

Just yesterday, shortly after the BOJ's shocking announcement, Kuroda found himself dodging a concerted attack in Parliament from lawmakers who charged the policy was "victimizing consumers and sending a message of despair", the WSJ writes. 

Even a ruling-party member, Masahiro Ishida, called the policy hard to grasp. “It could have the opposite effect of confusing the market,” he said.

It already has. But the problem is not that the market is confused; it is that the market's reaction to the BOJ's NIRP, which as we explained previously was largely due to central banker "peer pressure" during this year's Davos meeting, has led to a global revulsion against negative rates in general, thus validating the BOJ's error.

The criticism has come as a surprise to central-bank officials who thought their efforts to spark lending and faster economic growth would gain more public support. “Those who understand this policy are criticizing us, and those who do not are also criticizing us,” said one official this week.

Here the WSJ adds something that is patenly wrong: "It is a symptom of a global problem. The more central banks move into unconventional policies, the harder it becomes to get their message across. That is a particular problem when the policies are supposed to work in part by inspiring confidence."

Dead wrong: central bank policies are supposed to work by boosting the market; the narrative follows from there. It goes without sayinng that had Japan's NIRP somehow sent stocks soaring and the Yen crashing, the avalanche of praise would have been constant and Kuroda would be deemed a hero in parliament. Alas for the BOJ - which failed at the simple task of manipulating the market higher in the initial kneejerk reaction - that did not happen, and now Kuroda is suddenly fighting for his professional life.

And since the BOJ's market domination had finally cracked, a new narrative emerged: one which demonstrated the BOJ as being a bunch of "clueless losers", with no understand of what they are doing.

Although negative interest rates have existed for some time in Europe, the idea was unfamiliar to most Japanese when it burst onto the front pages late last month. Initial accounts focused on what could happen to bank deposit rates. That is a sensitive issue in a society where wages have barely risen since the 1990s and where one in three citizens receives pension income.


“Deposit one million yen and earn annual interest of ¥10,” said the headline of an online article Tuesday by Japan’s biggest daily newspaper, the Yomiuri Shimbun, telling savers with nearly $10,000 in the bank that they could expect less than a dime in interest

But nothing demonstrates Kuroda's bafflement quite as much as the outright hostile reception he got during his speech before parliament on Thursday:

In Parliament on Thursday, opposition lawmaker Shinkun Haku squared off with the Bank of Japan’s Gov. Kuroda on whether commercial banks would effectively introduce negative rates by hitting consumers with fees in excess of the tiny amount of interest paid. “Can you deny that banks will put an additional burden on average depositors?” Mr. Haku said. “If you can’t deny it, don’t. It’s a yes or no.”


Mr. Kuroda said he didn’t want to speculate about fees, but “there’s no chance that deposit interest rates will turn negative.”

Which is a lie - not only will deposit rates ultimately turn negative, the only questions are when and by how much. 

He said negative interest rates had helped spur lending in Europe with few harmful effects. “Europe has much larger minus interest than the Bank of Japan, and I haven’t heard of minus interest rates being applied to individual depositors there,” he said.

Someone please inform the Credit Suisse or Deutsche Bank stock about the "few harmful effects", or the fact that Europe's economy is once again slowly relapsing into a recession, only this time with some 1.5 million Syrian refugees to partake in the festivities.

It didn't stop there:

"Mr. Kuroda’s responses merely inspired further attacks from the opposition, which has been looking with little success for an issue with which to dent Prime Minister Shinzo Abe’s popularity.... a Communist Party lawmaker, Akira Koike, said negative interest rates were bad public relations. “You have sent a message to the people that they had better watch out because Japan’s economy is in trouble,” Mr. Koike said.

Which in itself is a stunning of just how stupid communists, or anyone else for that matter, still are and are utterly incapable of grasping the most simple equality of the post-crisis era, namely that any central banks intervening = the economy is in trouble.

And of course Japan's economy is in trouble: it has had 6 recessions in the past 6 years as it rushes toward a demographic singularity in which there is simply no longer a Japanese population. Japan's economy is in so much trouble, the only question is when does it disintegrate into a Venezuela-style supernova.

But we can see where the confusion comes from. As the WSJ conveniently notes, central banks "policies are supposed to work in part by inspiring confidence" and instead "lawmakers charged the policy was victimizing consumers and sending a message of despair."

No: the message is one of reality, because the can kicking for Japan, having gone on for 40 years, is almost over. The good news about a central bank-free future is that it will hurt - a lot - for a while, and then normal growth can resume, but not before trillions in fake paper wealth are wiped out and quadrillions (in Yen terms) in debt is swept away.

As for Kuroda, we will fondly remember him forever as Peter Panic. There was also this pearl in the WSJ piece: "opposition lawmaker Motoyuki Odachi accused Mr. Kuroda of sounding like a World War II propaganda broadcast."

Dear Motoyuki, all central bankers sound like a World War II propaganda broadcast, one on which the time has long ago come to pull the plug.

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the not so mighty maximiza's picture

negative interest rates is a product of a 3rd rate education...bitchez

Pool Shark's picture



"...all central bankers sound like a World War II propaganda broadcast."


Kuroda = Tokyo Rose

knukles's picture

"Baffled" because you're wrong?
Admitting you have a problem is the first step in recovery 
(Get it, "recovery"?.... more than 3 circles within circles there, folks)   Hah ha ha ha ha ha ha    Recovery....

Boris Alatovkrap's picture

Sometimes Boris is wish was dentist. Like when see photographic of Kuroda head back laughing, is feel very strong urge grab forcep and slowly remove every tooth from Bankster mouth. Boris' cousin Yuri is dentist… maybe, just maybe…

FreeMoney's picture

And I thought Krugman was there advising Japan on how to stimulate their economy into "rainbow-unicorn" growth again.  Japan has shown the world the complete failure of Keynesian economics, by example.

knukles's picture

You thought 100% correctly, FreeMoney! 
Paul Krugman was in  fact hired by the JapGoobermint as a consultant (or whatever you'd call the little asshole) to advise them on fiscal and monetary policy to rebound from the depths of neo-Keynesian Hell. 
                                           His Prescription was MOAR

BlueStreet's picture

Lucky for them they have the longest life expectancy on the planet. 

Janet Shalom Bernanke's picture

"Kuroda is suddenly fighting for his professional life."

I have a feeling that his professional life will not be the only life he is fighting for, when this is all over.


Civilization is not so civilized once they can no longer put food on the table to feed their families, or when they don't have a roof over their heads.

I am not making a threat here, I am merely warning about the very thin line between civility and noncivility.   Just read your history books, and you can look at very recent history if you don't think it can happen in Japan or the U.S.A.




These clueless central bankers fail to realize that they arent' playing a video game here, they are playing literally with peoples' lives, livelihoods, their futures.  

Central bankers reading this message:  You need to really think about what it is that you are doing.  




r00t61's picture

One of the benefits of living in an ivory tower is being able to ignore reality.

Right up until the point where the plebes push the tower over.


insanelysane's picture

Exactly, put a bunch of ass kissing, yes people in a room together and they come up with the "greatest" plans and then are absolutely shocked when the plans fail.

Kobe Beef's picture

Who owns the Bank of Japan?

Janet Shalom Bernanke's picture

Central bankers reading this message:  You need to really think about what it is that you are doing.  Propping up a stock market, distorting asset prices, causing massive leverage to be taken massive misallocation of resources, will ALWAYS eventually seek their own balance; and you are delusional if you think that you can prevent recessions; you only make the next recession the size of a depression.   You can manipulate the natural flow and direction of water so long, eventually the water will erode your controls and find it's true balance.   

two hoots's picture

Like the decision to use nuclear weapons the Federal Reserve, Janet Yellen, carries the same weight with her decisions  as all could end with grave results.    They are treading on sacred ground (our "earned" money) and they best be careful.

detached.amusement's picture

You really need to quit acting like central banking exists for its publicly stated goals.

SuperRay's picture

Well, despite the fact that it is an utter and complete failure in Japan, Droid Yellen will still go there.

two hoots's picture

It will be more about the Federal Reserve demonstrating its self-exaulted power rather than some economic play, they deceive themselves.  They are not aware of their godly departure from reality, from our society (read Clintonism).

USA is not Japan, not Europe.  We came here to get away from that control crap.

Bubba Rum Das's picture

"negative interest rates is a product of a 3rd rate education...bitchez"

Yet, the Japanese are supposedly one of the best educated populations in the world?

Of course the way they have handled the Fukushima situation doesn't say much for this either...

Pumpkin's picture


Satanists always likes things backwards and upsidesdown.

CHoward's picture

I always thought the Japanese were among the smartest people on the planet.  Guess I need to rethink that. 

the not so mighty maximiza's picture

they are but the brainwashing since childhood has fucked everything up.    1 generation common sense will return

shovelhead's picture

Have some nice Fugu sushi.

You'll get a little buzz if it doesn't kill you outright.

Yup. They pay a lot of money for the thrill of cheating a excruciatingly painful death.

Smart as hell. How smart are you if you WANT to eat something that looks like this?


remain calm's picture

People with small dicks have big brains. Makes sense, look at black people.

City_Of_Champyinz's picture

I'm gonna remember this good old folksy racism by thinking about Asians.

Oldwood's picture

Desperation resulting from delusions of omnipotence effect all those who go there.

Janet Shalom Bernanke's picture

Why would you think that the Japanese were the smartest people on the planet?  What have they done aside from being destroyed in WW2, Fuckashima, 1989 Crash and roll, ZIRP, NIRP, and on and on......

They have Toyota, and Honda Corporation.  That's it.     I was and continue to think that the Japanese are the stupidest people on the planet.  Hate to make blanket statements here,  but they do have a pretty consistent record of completely screwing things up, especially their inept small dick leaders, and I use the term 'leader' loosely.  

joego1's picture

They have a great society, their problem is that they listened to a Keynesian.

Yen Cross's picture

     Just wait until all confidence is eventually lost in Japanese bonds. The BoJ is so debt ridden, they won't be able to print fast enough to stave off the hyper inflation.[ buy back the bonds from sellers]

 Can you imagine what the debt load would be on the BoJ, if interest rates even rose 100-200 basis points?  Welcome to Asiababwe- Japazuela.

shantyman's picture

That is an interesting scenario...thanks YC....I never really looked at the bonds, have been playing the currency...thanks agin for the heads up

Farmer Joe in Brooklyn's picture

Same will happen to the US treasuries one day.

Flight to safety until becomes obvious that the very dangers you were fleeing rested in the sovereign government that you were lending to.


Tick tock, tick tock...

Janet Shalom Bernanke's picture

I can't wait to watch Tokyo burn.  The glow will be able to be seen from outer space.



GreatUncle's picture

Yen Cross.

In the connected world of free trade etc. and all the other duplicity once one central banks fails I think we will get a chain reaction wiping out the lot faster than Japan can achieve hyper inflation.


Yen Cross's picture

 You make a compelling argument. I actuallly wanted to discuss that topic, and am thankful for your " follow -up".

 The BoJ owns a massive part of the JGB market. I wonder how deep KAMPO, and the Japanese Postal/Pension/ Insurance collaboration, is into Japanese Bonds?

 From what I've seen, it seems like lack of yield, has forced Japanese macro offshore for yield.

Phillyguy's picture

The economic “problems” in Japan which have been extensively covered by MSM are only part of the problem. Not surprisingly, there is virtually no discussion of the proverbial Elephant in room (i.e., Japan) the continuing economic/financial disaster at the Fukushima Daiichi nuclear power plants- the disaster that keeps on giving. Clean up costs (which have barely begun) will cost Japan $ hundreds of billions and take over a decade to complete. TEPCO and GE were involved in the design and building of these reactors and should be held financially liable for the environmental disaster they created. Is it any wonder no one wants to bring this up?

Amish Hacker's picture

I don't see a lot of articles about the crew of the USS Ronald Reagan, either.

carneades_jazz_hands's picture

NIRP is just another form of tax with a velocity destroying kicker.  Who really thinks raising taxes will encourage economic activity?

Sorry, the Japanes have been voting to be shit on by their politicians for decades.  This is what happens.  Kind of like Illinois or California in the US.

Kaeako's picture

Looks to me like wherever the people get to vote, not just Japan, the majority vote to be shit on. Maybe it'll all be over soon.

GreatUncle's picture

Oh you get to vote in the illusion of "your vote counts".

No accountability for lying politicians is the issue, break a promise forced to resign and caught thieving jailed and all assets stripped.

Wow72's picture

It works for them and not for us, thats why they cant figure out why it would be wrong... because they only go ONE-WAY --> Out of your pocket. 

GRDguy's picture

Leaders baffled?  They just don't understand why folks don't believe them anymore when they try to hide their lyin' and stealin'.  There really are limits.

Vlad the Inhaler's picture

Hopefully America will react with pitchforks and torches.

onmail1's picture

I believe Japan has to make policies

as dictated by America

in total surrender

Uchtdorf's picture

Yep, they were forced into the Trilateral Commission. They are toast. The common man is so decieved over there.