Bank of Japan - They did it again

One has to admit: The BOJ does know how to fight,hide and disguise.

So let us see what the financial media pundits headlining on BOJ's move today.

Bank of Japan, Government Announce 2% Inflation Goal  (Bloomberg) (original article was removed by Bloomberg)

Yen Weakens As Bank Of Japan Raises Inflation Target   (ibtimes)

UPDATE 2-BOJ doubles inflation target, adopts open-ended asset buying    (Reuters)

Japan öffnet die Geldschleusen noch mehr   (NZZ)

(=Japan opens monetary spigot even more)


And now we check what the BOJ acutally said (or not said)

Bloomberg; Reuters, Ibtimes you get a fail. Sit down.

Nop. BOJ did not introduce an inflation target ala ECB; BOE or the FED. They explicitly calling it a "price stability target". Nice move BOJ!

Bloomberg got it totally wrong by calling it an "inflation goal".

Also interesting to note is the term "open-ended asset purchasing method" . Note! Not program, but a method (= wich is made up of "critical parts," which means that it has separate steps that must all be addressed and addressed effectively for the method to be successful)

Banzai BOJ! Banzai!

My translation (interpretation): BOJ is aware of inflation risk that the (acutal) fiscal and moneatry  policy might entail. Not willing to let it out of control. More than 2% of inflation unaceptable for the BOJ.

Bla, Bla, Bla

That is hilarious. BOJ opening the monetary spigot? Agressive monetary easing by the BOJ? Nothing, nil, nada.

By 2014 they might or might not conduct agressive easing!? I mean by 2014. This was reverse shock and awe by the BOJ.

That's the game the BOJ loves to play; all hollow words.

Didn't the BOJ introduce a 1% inflation goal exactly one year ago? I do know that monetary transmission mechanisms have a time lag. But (if I remember it correctly) academia says that those lags are around half a year (maybe I am mistaken).

And now it is getting really interesting!!!

"The bank expects that the Government will surely implement measures,...., such as carrying out bold regulatory and institutional reforms, and furthermore, steadily promote measures aimed at establishing a sustainable fiscal structure."

Check out the adjectives: "surely"; "bold"; "steadily".

It is well known that the BOJ, with its restrictive monetary stance, always pursued politico-economic goals, mainly liberalisation, deregulation and privatisation of Japan's economy. But never ever (as far as I am aware) did they articulate it so explicitly. Wow!

Inflation target?As if!

Bla, bla, bla, bla

As fas as I can see it they are just communicating a policy of "window guidance" here. Bascially, encouraging the creation, channeling or encouraging the drainage of economic resources (e.g. credit) where and when it does deem it necessary. Old (monetary) policy tool, especially used in east asian economies. Its the most effectice tool for a central bank in a fiat system, where almost all credit is created by the private sector (e.g. Banks).


Joint statement BOJ and Government

Basically, the government is eating humbled pie here. They are caving in to BOJ's demands, e.g. good old chicago school medicine.

And the winner is.......? Yes I know. As always.