To the extent the Fed meeting is serious, we’ll get some comic relief just hours later when the BoJ will tell us that although the combination of cornering the JGB market to the point where it no longer functions and buying up 75% of the Japanese ETF market is working exceptionally well, unprecedented easing is still necessary and will continue for the foreseeable future where “foreseeable future” means “forever” plus however many years on top of “forever” is takes for Kuroda to get inflation to 2%.
That’s what we said on Sunday while previewing this week’s BoJ meeting and when it comes to providing the expected comic relief, Kuroda did not disappoint.
As expected, there was no policy change from the undisputed, heavyweight champion of the post-crisis QE-dominated world. And as expected, the Kuroda presser was chock-full of zingers. Here are the bullet point soundbites for your amusement:
- The Bank of Japan will tenaciously keep up powerful easing to achieve price goal
- BOJ won’t alter its ETF purchasing program just because shares rise or fall
- ETF purchases will help inflation by impacting equity risk premiums and, in turn, vitalizing the stock market, which will positively influence corporate investment and other part of the economy
- Kuroda says BOJ will take appropriate action if N.Korea problem requires it
- Current easing is enough to reach goal of 2% inflation [but] it is true that wage gains and inflation are slower than expected
Yeah. So, Kuroda is going to “tenaciously” corner the JGB market, there is exactly zero chance that he’s going to stop “vitalizing the stock market” by buying ETFs, he will hit that 2% price target by God even if it means printing so much money that we all have to make up a heretofore nonexistent term to quantify it, and finally, if Kim Jon-Un thinks a couple of errant missiles are more powerful than Pan’s magic money machine, well then Kim’s going to find out that Kuroda can fly.
But not everyone at the BoJ was on board (get it? “board”…). The vote was 8-1, with new board member Goushi Kataoka dissenting. Now if you didn’t know any better, you’d be inclined to think that any dissent as it relates to the BoJ’s lunatic policies would have to be centered around an objection to the inherent recklessness of it all – i.e. you’d think there’s no way to dissent here but hawkish. But this is the BoJ we’re talking about. Kataoka’s objections were actually of the dovish variety. That is, Goushi thinks Kuroda isn’t doing enough easing.
“Kataoka said that since there remained ‘excess supply capacity in capital stock and labor market,’ easing effects from the current yield curve weren’t enough for 2% price goal to be met around fiscal 2019,” Bloomberg writes, adding that “Kataoka also opposed the description of the CPI outlook, saying that although it was likely to rise for the time being due to oil and FX impact, the chance of it increasing towards 2% from 2018 onwards was low.”
The irony here is that while that seems patently absurd on its face (that is, how in God’s name could anyone contend that the BoJ needs to ease more?), Kataoka may actually be the most rational member on the team. Because if you’re going to cling to a commitment centered around hitting a target that is clearly out of reach, and if you’re going to keep insisting that the only way to hit it is with money printing, well then you’ve got to admit you’re nowhere close currently and as such, you need to ramp things up.
SMBC Friend Securities Co. Mari Iwashita demands to know more. “He opposed the board’s decision and seems to want to strengthen stimulus, but didn’t offer alternative suggestions,” Iwashita fumed. “He also opposed the outlook for inflation accelerating toward 2%, so I would like to hear his suggestions for how that can be achieved.”
Well Mari, I’ll tell you how it “can be achieved.” Just like this:
“What we need is a positive attitude and conviction.”