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Bank Of Japan Apologizes For Blowing Up Global Stock Rally
Sorry about that.
So said influential BoJ deputy governor Shinichi Uchida, only not quite in those words.
Speaking to business leaders in Hakodate on Wednesday, Uchida acknowledged the bank's role in catalyzing a tumultuous stretch for global markets culminating in an outright crash for Japan's equity benchmarks earlier this week.
"Financial and capital markets have seen a rapid weakening of the US dollar and a decline in stock prices worldwide, triggered by growing concern over a slowdown in
Wow. What a mess they’ve made. And they’re still wandering around, mentally and physically, as if they’re pushing ahead on a multi-day binge, believing that somehow, some way, they’ll make everything ok for everyone eventually.
BOJ owned 7% of the Japanese stock market as of May, 2024. No wonder they reversed their position on interest rates. No one likes unrealized losses.
https://www.ft.com/content/a452a9bc-5754-405d-8bb5-082d5caa60c1
What “losses”? They create money from thin air.
I hope — I really, really do, because I’m fine with the apocalypse — that one day, there’s a Lehman-like event and central banks just say, “You know what? There’s nothing we can do. We agree that conjuring money is irresponsible and that we’ve anyway fostered too much moral hazard, so we’re going to do the right thing and concede the limits of our powers and authority. We’re going to let it all burn down.” Then I can sit back and watch as everyone who spent the 14 years since Lehman lamenting moral hazard whines and complains and, eventually, leaps off rooftops and bridges, when their retirement funds lose 80% of their value and the supermarket shelves go empty.
And I thought I was a dark guy… 🙂
I just get exhausted with that kind of thing on some days, particularly given the extent to which it never seems to get old to people, even after 15 years of it.
I mean, when do these tired punchlines and cheap jokes about central banks stop being funny to people? Or is it just that new market participants haven’t heard them before?
Sure, I could’ve written this article: “Bank Of Japan Panics After Losing A Bajillion Yen In Stock Crash,” lifted the paywall, posted it to Twitter (“X”) with the goofiest picture of Kazuo Ueda I could find and generated 20,000 clicks. Anybody could.
But what kind of life is that? Who can do that all day, every day? It’s just mindless, cheap drivel. It’s the market equivalent of Gallagher smashing a watermelon with a sledge hammer.
(Incidentally, I’m not picking on “SeaTurtle” here. I’m just speaking in general about the financial “blogosphere,” finance Twitter, and so on.)
Brings back a memory from late 2008 when the lame duck Bush administration was weighing how to respond to the early days of the GFC. I tuned into Rush Limbaugh who was cheering on Ted Cruz etc who were opposed to any “bailout” of the financial system. Even as T-bill yields dipped below zero in the secondary market and a local branch of a large brokerage house called in to tell us they had exhausted their T-bill inventories.
Presidential Medal of Freedom winner Rush Limbaugh vocally fought a bipartisan financial rescue plan declaring who cares about the stock market? Just “let it burn down”. It was a first wake-up call that populism is not always business friendly. Something the Trump supporters in tech and finance might be wise to remember.
If the 4th wall was rebuilt between central banks and markets over the past year, it appears to have come with a back door…
It’s important, I think, that we all acknowledge this simple reality: If we were in their position, we wouldn’t be as bravely hawkish as we are when we’re typing at them anonymously behind keyboards, with no accountability.
That goes for everything, not just monetary policy.
We all have a lot of strong opinions about what “we’d do” if only “we were in charge.”
In most cases, we’re lying to ourselves and to each other. We wouldn’t be any braver, and we might even be less brave.
Understood and good point. Probably no reason to state the obvious about BOJ extremism and oscillation, but I did anyway.
My opinion, expressed w/ a heave dose of sarcasm today, is informed by historical comparisons and the views of a few scholars (e.g., Hayek, Keynes), but I am sure you are much more familiar than me w/ such examples. Professionally, at one time in my life, I was on the receiving end of “arm-chair QBing” and am close to more than a handful of others who’ve dealt w/ (and continue to deal with) the same.
BOJ, in particular, but also the FOMC and the ECB, certainly appear to my small mind to have gone well past saving economies/stabilizing financial systems and engaged in rather extreme people pleasing efforts through the formulation and implementation of monetary policy. Their collective approaches seem destined to provide cover for risky behavior and a lack of accountability among market participants and themselves–until the energy they’ve suppressed reverses course.
Again, you’re right H. It’s easy to criticize and hard to design and implement all laws, regs, and policies. I’m done lol.
I think any over-reach or mission creep by CBs can usually be explained by reference to what the central government is or isn’t doing. Often we see governments hamstrung by gridlock, infighting, unwillingness to make hard choices, budget deficits, etc, leaving their CBs to use their monetary policy tools on problems not well suited to those tools.
I think these central bankers are focused on trying to thread a needle between keeping the economy from overheating and keeping the economy as strong as sustainably possible.
Whilst market participants may be often talking their book hoping radical steps become necessary to help them make a profitable trade. So not bravery but maybe fear and desperation in a bad trade. I am hopeful that you are right and I am wrong. My empathic sensors however read the missives and feels for these ‘brave’ souls.
I don’t think it’s literally about bravery. It’s not just that the trade offs are that much brighter when you’re in charge/the buck stops with you. The overwhelming desire to “first, do no harm” makes lots of leaders pretty cautious, yes, but there’s another factor – you cannot ignore the guys on the other side of the debate pushing hard against you the way you can when you’re thinking “if I was in charge…”…
And having to compromise with the opposition makes the resulting policy even more cautious.
“Gotta serve someone” Bob Dylan, great track.
An interesting episode for those who think the Fed communicates too much and should do surprise the market more often. (Confession: I’ve been one of them.)
Maybe most of the time it works, one of ten times you blow up your country’s stock market, and one of twenty times the index doesn’t bounce back the next day (helped, perhaps, by Ministry of Finance furiously buying stocks? speculating) and you have to fall on your sword. Which, I gather, is or used to be more painful in Japan than in most places.
hahaha… for the falling on the sword/seppuku joke