You’re Lying About Kuroda, So Let Kuroda Tell You What Kuroda ‘Never Said’

Remember last Friday? If you’re Sam Nunberg you don’t, because you’ve seen the bottom of at least a dozen fifths of liquor since then.

But the rest of you probably recall that Kuroda dared to mention the word “exit” in his confirmation hearing, stoking further jitters about the time table for the BoJ’s eventual (maybe) exit from accommodative policy.

We profiled that episode here, and although it was largely lost in the tariff shuffle, you can still see it on an annotated chart. We’ve updated that chart to include this morning’s North Korean nuclear olive branch which, while sinking the broader dollar, is leading to some risk-on sentiment and thus driving USDJPY higher:


Well the reason we bring this up again is because Kuroda walked it back overnight and you want to keep close track of this. As a reminder, any hint that the BoJ is set to embark down the long road to normalization has been met with outsized FX reactions and in the current environment, the tendency for FX to overreact is even more pronounced.

So in his second confirmation hearing, Kuroda noted what we and everyone else has said – namely that saying he’ll think about normalization in 2019 isn’t really saying anything because that’s when they expect inflation to get back to target.

“Regarding exit, I didn’t say that we would make a change in FY2019, what I said was that the chances of inflation reading 2% in FY2019 was high,” he told parliament on Tuesday.

“Therefore, I said that we would be discussing how to move forward with exit,” he continued.

And then for good measure: “I never said we would be exiting immediately in FY2019.”

Right. Get your shit straight people. On the other hand, remember this from Deutsche:

The exact nuance of what the Governor said is not particularly relevant. What matters is that for the first time Kuroda is explicitly downplaying the open-ended nature of the BoJ’s QE program and crucially displaying a willingness to discuss exit in the face of an already materially appreciating yen. The implicit signaling is at best tolerance for yen appreciation. Note this is the broader message from Japan — finance minister Aso’s comments overnight offering no pushback either.

Of course there’s a BoJ meeting later this week which means we’ll get to parse this issue further. Stay tuned for that and in the meantime, all of the above is of course bullish to the extent that Kuroda serves as a kind of security blanket for your inner Linus.


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