Bank of Japan caves in again


I don’t agree with the BoJ’s decision to cut from 0.3% –> 0.1%. The cost of borrowing is not the problem here. In fact, the impetus to cut was at least partially pressure from the MoF, in what amounts to a silly attempt to ease yen-strength. The reaction has been muted, and for now, the USD/JPY isn’t likely to even recover a 90-handle.

So we have a snafu and unfortunately what appears to be the backdrop for a revisit to all out QE. In addition, the government is said to be eying taking stakes in banks again. No doubt history repeats, but this fast? Japan’s (inaccurately) so-called “lost decade” is poised to become the lost quarter-century. Deflation lives on.

The only potential I see coming out of all this is with a strong yen and an ever-lower cost of capital, the ability to pursue outbound M&A. But why risk jumping the gun by buying now, when global economic conditions continue to deteriorate?

clipped from
Japan rates slashed

Central bank led by Masaaki Shirakawa (left) reduces its key interest rate for the second time in 2008, cutting it to 0.1% from 0.3%. Rate is the lowest in the industrialized world.

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