BoJ speeches delivered in December by Ueda Man, Himino and Nakamura all contained the exact same information and all were the same exact presentations. Seen in all discussions was speculative concepts to a possible end to QE and to change interest rates. Speculative as Ueda Man is in his 8th month as BOJ head and 8th month to the overall 2 year review ordered last April when Ueda Man assumed head Governor position.
All speeches outlined concepts to relationships as Wages, Inflation, Prices and Corporations ability to change buying and selling prices alongside Commodity prices. In past BoJ speeches and Monetary Policy statements and Minutes is seen the virtuous cycle. Under a perfect virtuous cycle and perfect to reflect changing prices, Imports, Exports and USD/JPY levels would factor more exact than the current monthly numbers.
The long run view and purpose to all presentations was focus on Imports and Exports, particularly Exports as the most vital component to the health of Japanese Economics. Speeches were delivered to the middle Prefectures of Japan and Osaka, home to the vast majority of Japanese Corporations.
The BoJ contains a long long way to go before any consideration to end QE and adjust interest rates. Under the present speculation to the virtuous cycle, adjustments may never happen.
The BoJ uncollaterialized Call Rate was introduced July 1985 at 6.41. By December 1990, the rate rose to 8.22. The BoJ then began a multi decade drop cycle.
By March 1995, the Cal rate was located at 2.18 and 1.52 in April 1995. The BoJ then dropped the Call rate to 0.46 in December 1995. The Cal rate then traded from 0.46 to 0 between 1995 to 2004. The number at 0 traded January 2004, April 2004 and July 2004.
From 2004 to 2016, Call rates traded in small ranges from month to month and no difference from today. The only major change was April 2016 when the Call rate traded negative. The Call rate traded negative yet in tiny ranges from 2016 to 2023.
While the BOJ members focused on words of changing interest rates, the Call nor Tona Rate was never mentioned. The Tona Rate’s recent introduction and purpose serves as a longer term, 30, 90 and 180 day complement to the overnight Call rate.
As Shinici highlighted in the August 2nd speech, the BOJ controls short term interest rates and won’t allow the 30 and 90 day crossover as the consequences for USD/JPY is enormous in big movement terms.
While the BoJ highlighted the Economic terms to a possible raise and QE end, the enormous problem not yet factored is how to possibly adjust Call rates to Tona Rates without sending USD/JPY to unknown depths of volatility.
Typical for the BoJ and central banks to lead us to the water’s edge but never inside the inner sanctum.
The end result is the BoJ is not changing interest rates anytime soon.
