Banking in Japan

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An interesting article about how Japan's Banking industry is having to cope with the quake. From William Pesek writing at Bloomburg:
�Lehman Shock� Is Kid Stuff Next to Fukushima
Of all the tremors being felt in Tokyo, Masaaki Shirakawa is experiencing some of the biggest.

The Bank of Japan head is under greater pressure than any of his predecessors over the last 20 years to get radical. With Japan facing the triple whammy of an earthquake, tsunami and nuclear crisis, Shirakawa is getting shouted at from every direction to bring the BOJ back to the 1930s.

He must tread carefully. Wherever he takes monetary policy over the next 12 months, the BOJ is likely to be shackled with those decisions for the next 12 years. It�s said that central banking is about gradualism. In Japan, it�s glacialism. Even when Japan was growing in the 2000s, the furthest the BOJ got interest rates from zero was 0.5 percent. Then, back to zero.

Japan has three paths to revival. One, issue loads of debt that may prompt credit downgrades and raise taxes. Two, dump its $886 billion of U.S. debt, destabilizing the biggest economy and enraging a key ally. Three, get the BOJ to monetize public debt. Not surprisingly, lawmakers like what�s behind door No. 3.
William follows with a nice analysis of each option and a bit of the history leading up to our own recent financial melt-down and how it impacted Japan. Good reading...

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This page contains a single entry by DaveH published on April 4, 2011 8:07 PM.

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