Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

AI Summary. The Bank of Japan raised its policy rate to the highest level since 1995 and flagged the risk of underlying inflation overshooting its 2% target, but the yen fell 1.3% to nearly ¥158 per dollar as two dissenting votes cast doubt on appetite for further tightening.

Leo Lewis and David Keohane Financial Times
Date Posted:

The yen weakened even as the Bank of Japan raised its policy rate by 25 basis points to 1.25%, a 31-year high. The yen has surrendered ~ half its gain from the US-Japan intervention in July.

Why did the yen fall after a rate increase?

Core argument: The yen sank 1.3% to nearly ¥158 to the dollar after the Bank of Japan raised rates to their highest level since 1995, as two dissenting votes out of seven cast doubt on the appetite for further tightening.

In a signal to markets that further rises in borrowing costs are likely to follow, BoJ governor Kazuo Ueda highlighted the risk to Japan’s economy of underlying inflation overshooting the central bank’s target of 2%. However, the yen sank 1.3% to nearly ¥158 to the dollar following the decision despite Ueda’s comments, as the [two] dissenting votes [out of 7 total] cast doubt on the appetite for further tightening in Japan. Analysts noted that the two dissenting voters on the board were both appointed by Japan’s Prime Minister Sanae Takaichi, who favours reflationary government spending and has in the past been critical of tighter monetary policy. Marcel Thieliant, head of Asia-Pacific at Capital Economics, said that “with the two most hawkish board members set to depart next July, the composition of the board will probably become even more dovish.”

Takeaways by Macro Roundup® AI

  1. The yen sank 1.3% to nearly ¥158 to the dollar after the Bank of Japan raised rates to their highest level since 1995, as two dissenting votes out of seven cast doubt on the appetite for further tightening.
  2. Bank of Japan governor Kazuo Ueda signalled that further increases in borrowing costs are likely, highlighting the risk to Japan’s economy of underlying inflation overshooting the central bank’s 2% target.
  3. Marcel Thieliant of Capital Economics said the Bank of Japan board will probably become more dovish once its two most hawkish members depart next July, while both dissenters were appointed by Prime Minister Sanae Takaichi, who favours reflationary government spending.

Related Articles:

  • Where is the Global Debt Crisis Most Acute? — A proxy for strain at the long end of government bond markets — the gap between the 10-year yield expected in 10 years' time and today's 10-year yield, scored against its own history — shows Japan as an outlier among the G10 economies.
  • New Respect in the Land of the Rising Yen — Norway's sovereign wealth fund is reallocating its fixed income portfolio in a way that likely shifts from US Treasuries toward Japanese government bonds, prompting speculation that more international money will return to Japan's newly competitive yields. Japanese overnight interest rates are forecast to rise by a full percentage point over 12 months, to 1.9%.
  • Yen Intervention = US Self-Preservation — Japan's two traditional options for supporting a weak yen — much higher Japanese interest rates or large sales of dollars and US Treasuries — would both pressure US yields, as Japan holds about $1tn of Treasuries. US willingness to back Japan via its exchange stabilization fund and the Federal Reserve's international repo facility suggests officials see that risk.
Showing 247 database articles primarily about Financial Markets