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Boj Mulls Emergency Meeting Early Next Week-Source

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The Bank of Japan is examining holding an emergency meeting early next week to ease monetary policy as the strong yen threatens the country's fragile economic recovery, a source familiar with the matter said.

The most likely option is for the central bank to expand its fund-supply tool put in place in December last year, under which it offers up to 20 trillion yen ($234 billion) in three-month loans to banks at 0.1 percent, the source told Reuters.

Another possibility is for the BOJ to increase its outright government bond purchases from the current 21.6 trillion yen per year, although this is less likely due to strong opposition from some within the BOJ.

The date of the emergency meeting is yet to be decided and there is still a chance the BOJ may opt to wait until its regular policy-setting meeting on Sept. 6-7 to loosen policy, said the source, who declined to be named due to the sensitivity of the matter.

But an emergency meeting may be held as early as Tuesday, when BOJ Governor Masaaki Shirakawa is back in Tokyo after his visit to the United States for a central bankers' meeting in Jackson Hole, Wyoming.

The government is also expected to announce an outline of its stimulus measures for the economy on Tuesday.

This seems a great story the BoJ may or may not hold an emergency meeting several days before it's due to meet anyway.

Excellent press narrative here.

So it appears everyone wants cheap money to guarantee a recovery.

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Race to the bottom.

If everyone devalues by 20% status quo results. The key is to get ahead of your rivals by devaluing before they do and then take advantage of it for the brief period you have before the others catch up in the "devaluation" race.

The US were successful in this during Paulson's "strong dollar policy years"* when the $ was kept low vs. the Euro and Pound to gain trading advantages. But it never lasts as the advantages gained by a cheaper currency eventually lead to an inflow of cash pushing that currency up again. Which is where the $ is today relative to the Euro. If the US decide to go with another "strong dollar policy" and attempt to devalue to try to preserve trading advantages they may well find the plan backfires as the fragility of the EU economy may push it over the edge and the Euro will beat the $ to the "bottom" and the cycle will begin again.

Bottom line is that currencies move relative to one another and it is impossible to hold onto devaluation advantages in the longer term. In the final analysis--your currency reflects the strength of your trading position. Price yourself out and your currency suffers--and vice versa.


* Similar to Merv King's years of "vigilance" vs. inflation which was bankspeak for inaction and allowing the opposite to happen.

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  • 440 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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