How Long Can the BOJ Get Away With Rate Shocks?
Governor Kazuo Ueda must take control of the narrative and show that the central bank has agency.
Communicating better.
Photographer: Kiyoshi Ota/BloombergCentral bank decisions have become more predictable. Not in Japan. Kazuo Ueda broke one of the cardinal rules of monetary practice with his recent shock hike in interest rates. Judging from his unrepentant performance in parliament last week, he absorbed few — if any — lessons from the episode. The unfortunate upshot will be an erosion of trust.
In several hours of testimony on Friday, the Bank of Japan governor pinned the blame for an early August market meltdown on anxieties about the US economy rather than anything that transpired in Japan, let alone the July 31 rate increase. The problem is that this assumes the BOJ has no agency. America is the ball game. The Federal Reserve is certainly first among equals, but local decisions also matter.