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Bank of Japan Governor Toshihiko Fukui Stays Talkative

Toshihiko Fukui could not avoid the microphones on Tuesday: First, he told reporters that the BOJ will not raise interest rates based on a single economic indicator, which I suspect we all suspected. To give some context, this was in response to a Diet member who asked Fukui about Monday’s report showing capital spending at an all time high. The Nikkei continues to hold the (my?) line that an interest rate hike will not come until after the Upper House elections in July, though the Nikkei still holds on to the August prediction while I’m up to 50-50 on July or August (Link updated to English translation version).

Then, as news hit that the yen’s real effective exchange rate had slipped to it’s lowest level since the signing of the Plaza Accord in September of 1985, and that the New Zealand and Aussie Dollars had reached 15 year highs against the yen, Fukui warned that the sudden unwinding of the carry trade could have severe effects: “Because there is a bias in the risk, the real economy is likely to be adversely impacted in the future if there is a sharp unwinding [of the carry trade.]”

Has another central banker had exchange rates so forced into his monetary policy decisions before? Last year (and the year before) I thought, “That guy has the easiest job in the country.” Now I’d rather come after him and clean up his mess.

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