Yesterday’s financial statement analysis replaced my usual Wednesday news and music blog posts, so here comes today. Anyway, I have little time today because the promises related to that statement are queuing up. So, today I want to reflect on Japan and ECB sanity before some Duke. So we have now started another experiment. Most central banks have caved under pressure from financial markets to raise interest rates. But the Bank of Japan and, to a lesser extent, the European Central Bank are not. We’ll see how it turns out. I think the BOJ has the pulse, while other central banks are going the wrong way.
Bank of Japan keeps calm, once again shows the world something important
As the Fed loses its cool along with the Bank of England – thinking they can raise interest rates to address rising inflation caused by ships unable to get goods where they are needed and workers unable to work because of illness. It’s good to see that the BOJ is resisting the same pressure from financial markets.
Markets are pressuring central banks to hold rates because that will help them profit from bets.
On Monday (March 29, 2022), the Bank of Japan said it would not give up defending its yield cap policy.
It entered the bond market and offered to buy unlimited amounts of Japanese 10-year government bonds.
Japan also faces rising import costs due to additional supply issues caused by the pandemic and the war in Ukraine.
The Bank of Japan issued an announcement – Increase auction schedule and increase the amount of direct purchases of Japanese government bonds (March 30, 2022) – They outlined plans to continue the bond purchase program and:
…increase purchases…
Think of the monetarists out there calling for a rate hike.
The central bank has told markets it will buy unlimited bonds this week to maintain control over the 10-year JGB yield.
They intend to prevent yields from rising above 0.25% (their target is 0%).
As usual, the “market” claims that the banks will lose their nerve.
They are also buying longer-dated bonds to stop the market from distorting longer-dated yields.
The central bank kept short-term interest rates at -0.1% and 10-year bond yields at 0%.
The 10-year yield was 0.22% this morning (Thursday) after four days of increased purchases and is still falling.
Bank of Japan Governor Haruhiko Kuroda told the media last week that the current small depreciation of the yen is “generally positive” for Japanese exporters.
So we have now started another experiment.
Most central banks are capitulating, the Bank of Japan and, to a lesser extent, the European Central Bank are not.
All the countries covered by these central banks face the same supply-side cost pressures and the consequences of the war in Ukraine.
Let’s see how different policy approaches work.
For the record, I think the Bank of Japan has once again demonstrated a remarkable ability to execute macroeconomic policy.
It supports a fiscal policy stance concerned with keeping unemployment low and maintaining top-notch public services.
Taxation Summer School – June 2022
While the details are still being worked out, I can confirm that I will be teaching at Levy Summer School in the US this June (June 13-18).
This is the first international trip I am willing to take since Covid. But Levy’s work is important and I will always try to support the team there.
I’ll pass them on as more details emerge.
Nice to meet people again (with our masks on), but I don’t think I’ll be at any party!
Music – The Duke of John Coltrane
Here’s what I’ve been listening to this morning at work.
I heard this music on the radio when I was younger and my parents had some records I used to listen to when I was truant at school and sought the calm of what was called the radiograph at the time – a cheap hi-fi system for that working class of people had to play records and listen to the radio.
And, when I was able to start buying records, it was one of the first purchases.
This song is- emotional – This version of the classic is from the 1963 album – Duke Ellington.
album – John Coltrane – Duke Ellington and John Coltrane – Published by Impulse Records.
The Duke composed the music in 1935 and added lyrics later.
John Coltrane’s tenor on this album is one of the best on display.
The other performers of this song are:
1. Aaron Bell – Double bass. During the recording of this album, he worked with the Duke Ellington Orchestra, but soon left to play with Dizzy Gillespie. He later earned a doctorate in education from Columbia University.
2. Erwin Jones – Drums – During the recording of this album, he played with John Coltrane’s band and was a major contributor to modal jazz and the post-bop jazz era.
The question I used to ask myself as a kid was how can four people make such a beautiful sound together.
The way the song transitions between minor and major keys in the middle part (interlude) is amazing!
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
