According to Breitbart:
The Bank of Japan’s decision Monday for a dollar swap accord with the U.S. Federal Reserve was welcomed by analysts, who said pumping liquidity into the banking system and helping businesses raise necessary funds are crucial to keeping Japan’s economic recovery on track.
Welcomed by analysts, in other words, it won’t work. The article goes on:
The BOJ decided on its commitment for the Fed’s program to provide dollar money to major central banks under bilateral swap accords. The recipient banks would in turn inject the liquidity into domestic money markets, where demand for dollars sharply rises as investors dump euros due to fears the sovereign debt crisis in Greece could escalate.
Interesting that the word “sovereign” comes up in this paragraph.
It gets worse:
“Everybody might have thought they were seeing another Lehman shock,” said Masamichi Adachi, senior economist at JPMorgan Securities Japan Co.
Greece is the new Lehmans? Really? Anyone who actually thought they were seeing another “Lehman Shock” needs to take Risk Management 101 again.
The Greek problem and its impact on global financial markets is “feared to cause jumps in short-term interest rates and in the cost for companies to raise operating money,” said Hideo Kumano, chief economist at the Dai-ichi Life Research Institute.
The contrarian position is thus made obvious; Greece doesn’t matter. Seriously, how much could short-term interest rates jump in Japan? Pin down an exact number or…I guess the alternative is give a quote to a journalist.
[Kumano] said rises in the cost of accumulating necessary funds would deteriorate corporate sentiment and further undermine appetites for business investment, adding that such fallouts could critically hit the Japanese economy, which has been showing signs of recovery.
This literally makes no sense. No signs of recovery are cited, except for this:
The BOJ has presented an optimistic view of Japan’s economic outlook…So as to keep the vulnerable recovery on track, the BOJ is trying to take preemptive measures.
Oh, the BOJ is optimistic. A bunch of rich guys with private chauffeurs are optimistic. That must feel good.
In its biannual report released last month, the central bank estimated Japan’s economy will grow 1.8 percent in the current fiscal year through March.
The BOJ has downgraded its estimates for GDP growth year after year. They are the worst predictor on record of how the Japanese economy will perform.
The kicker:
[The BOJ] suggested deflation will end in the next fiscal year, projecting a 0.1 percent increase in a key consumer price index in fiscal 2011.
Wow, that’s awesome. 0.1% – how ambitious. Good luck with that. Bear in mind that Japan includes fuel prices in core CPI.
As the Greek crisis hit financial markets and was feared to unsettle the global economy, “Japan must closely watch how the crisis could hit demand around the world and subsequently push back Japanese exports,” JPMorgan’s Adachi also said.
Has Joseph Nye fallen silent?
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