BOJ
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Early Exit from Bank of Japan Governor is Good for Abe
Bank of Japan Governor Masaaki Shirakawa told Prime Minister Shinzo Abe yesterday (Tuesdsay) that he will step down a few weeks early, on March 19, in order to align his term, which expires on April 8, with those of the two BoJ deputy governors.
"I told the prime minister that I will resign on March 19 so that a structure with a new governor and two deputy governors can start simultaneously," Shirakawa said at a press conference called after a meeting of the Council on Economic and Fiscal Poicy.
This will enable Abe to replace the entire central bank leadership all at once with people who are more sympathetic to his policy of unlimited easing.
Although some press reports have highlighted the apparent unenthusiastic support Shirakawa is giving to Abe's policies, Shirakawa's resignation is really just putting the Bank of Japan leadership transition process back to normal.
The Bank of Japan governor must be approved by both houses of the Diet. Back in 2008, former deputy governor Toshiro Mutoh was nominated for the top spot by the ruling Liberal Democratic Party (LDP) which held a majority in the Lower House but not in the Upper House, where the opposition Democratic Party of Japan (DPJ) held sway.
The DPJ rejected Mutoh's nomination and it took three weeks of political infighting before Shirakawa was approved as a compromise candidate and took office on April 9.
The situation is exactly the same today. Abe's LDP has a super majority in the Lower House but must get some opposition support to get their nominee approved by the Upper House.
By resigning as governor effective March 19, Shirakawa is undoing the delay caused by political wrangling five years ago.
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Here's the Surprising Winner of the Currency Wars
It's war by other means. With the Bank of Japan now buying government bonds and targeting an inflation rate of 2%, a global race to the bottom is on again.
Along with the Fed's commitment to "quantitative easing" and the ECB's promise to buy dodgy Mediterranean economies' bonds, Japan's latest move has sparked new fears of a currency war.
Like any other war, this one won't end well, either.
In fact, this same scenario played out in the 1930s, and the chances of another nasty outcome are quite high.
However, the mathematical reality is that the world's major currencies can't all be catastrophically weak against each other. It's impossible.
But the winner may surprise you. Because as this skirmish unfolds, it is the U.S. Dollar that will likely maintain its value against desperate contenders like the yen, the euro and the pound.
At the moment, those are the currencies that look distinctly unlikely to hold their own against the greater realities.
Here's why, starting with the yen.
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Bank of Japan Policy is Doomed to Failure
The Bank of Japan (BOJ), Japan's central bank, bowed to government pressure this week by adopting a 2% inflation target and accepting responsibility for achieving that goal "as early as possible."
The BOJ announced today (Tuesday) that it will begin a program of "unlimited easing" beginning in January 2014 following the end of the central bank's current asset-purchasing program in December.
In a statement announcing the results of Tuesday's Monetary Policy Committee meeting, the Bank of Japan said it anticipates purchasing 10 trillion yen in Treasury notes and 3 trillion yen in Japanese government bonds (JGBs) each month beginning in January 2014.
The statement also indicated the central bank's balance sheet will expand by about 10 trillion yen by the end of 2014 as a result of the purchases. No further expansion of the BOJ balance sheet is anticipated thereafter.
