Something Different About This One

In Japan, they call it “powerful monetary easing.” In practice, it is anything but. QQE with all its added letters is so authoritative that it is knocked sideways by the smallest of economic and financial breezes. If it truly worked the way it was supposed to, the Bank of Japan or any central bank would only need it for the shortest of timeframes.

That would be powerful stuff.

Instead, in June last year, the narrative shifted (again). Surpassing half a decade of this “easing”, it became clear after an upward start to the year inflation wasn’t going to come anywhere close to meeting the official price mandate. This time the central bank would try and blame online shopping for its apparent defeat. Seriously.

Fast forward eight more months and BoJ now signals it stands ready to do more. Reversing itself entirely, where once Kuroda’s gang openly talked about ending the thing, a year later they are back to taking it up a notch; this “easing.” Japan’s central bank is joining the rest of them in turning “dovish.”

If (yen strength) are having an impact on the economy and prices, and if we consider it necessary to achieve our price target, we’ll consider easing policy.

Governor Kuroda can blame the yen just as he blamed Amazon, that doesn’t change the situation for “powerful monetary easing.” Again, if it actually was what Economists say it is, then the yen would be following BoJ’s policy direction as it had in the earlier days of QE and QQE.

Something changed.

It’s very easy to see what. The global economy ended 2017 on somewhat of a high note; very high, according to central bankers. It finished up 2018 moving perhaps quickly the other way. The question now isn’t the direction, it is how far against expectations this downturn might progress.

Kuroda’s new “easing”, the Fed pause, and the ECB’s aborted liftoff together suggest globally conditions are already fraught with clear difficulties. Central bankers are always the last to figure these things out. If they are turning on policies, economic inflection is past tense.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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