Power And Dollar

Headless Central Bank

A headless central bank is never a good thing.  Not good for the local equity and derivative trading, not good in terms of international politics.  Since most of these positions are decided by elected politicians, decisions are less of emotion and spontaneity.  So, in the case of Japan’s central bank, Bank of Japan, is the opposition reckless to harm Japan’s standing in the international finance world or is the Prime Minister manipulated by the all powerful Japanese public servants?   


I present the argument that Japanese Prime Minister Fukuda may have no suitable candidate outside of Ministry of Finance veterans, even prior to the second veto.  Japanese parliament system is the best argument to have the administration elected by voters rather than run by parliament, similar to UK, Canada, Australian and other monarchies.  In this case, the public servants grow so powerful (since there is never attrition) that they are able to manipulate elected officials, primary candidates, business decisions and regulatory issues.  And Japan has never prepared to cultivate its own public administrator outside of its public servants work force.  The pool for any central bank job is very small.  And after the second veto and the condition that there cannot be a public servant veteran, this Japanese political drama will have to require backroom deals not among the elected politicians of the same stripe, but opposing parties.   

Of course it will impact on the Yen’s exchange rate.  It has impact on the TSE as well.  Everyone should know it hours ago.  However, one may have to pay attention to Korean markets and stocks as well, since a lot of Korean economy is dependent on Japan.  This may have impact on HK’s market.  There are quite a few banks listed in LSX and NYSE with operations in various parts of US.   

Some suggest BOJ can offer a lot to US in regard to US’ housing meltdown.  Yes, that is true.  But the world has changed so much since Japan’s meltdown.  Japan did not have any exotic products back down.  And Japan always bail out conglomerates.  And they are still recovering their mess, 15 years already.  They may offer everything from their lessons learnt to things you do not want to do, but not solutions.


March 19, 2008 - Posted by | business, Current Affairs, Current Events, economics, finance, Japan, opinion, stock, trading

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