As Nassim Taleb instructed, we should not be fooled by randomness. If you see six red results in a row at a roulette table, do not conclude the game is rigged. If you flip a coin, and it is tails six consecutive times, the contest is not necessarily rigged.
The Federal Reserve decided to leave its target interest rate unchanged at a range of 0.25 percent to 0.5 percent while suggesting a hike later in the year was very likely.
The US dollar has lost another 0.5% against most of the major currencies today, as Asia and Europe respond to the Fed’s decision. There are few exceptions to this generalization. The Norwegian krone has gained nearly three times as much, with the help of its central bank, which has played down for lower rates at today’s meeting. The euro is at its lowest level against Nokkie since the end of last year.
Much of what the Bank of Japan announced today had been largely leaked. While there was a sizeable response in the asset markets, the dollar’s knee-jerk gains against the yen were quickly unwound.
The BOJ lifted its self-imposed restrictions on its asset purchases and shifted the focus of policy from the monetary base to the yield curve. It is not clear that this shift increases the chances of the BOJ reaching its inflation target.
For close to 40 years after 1955, the Liberal Democratic Party (LDP) dominated Japan’s competitive party system. Opposition parties were not able to mount a successful challenge to LDP rule at the national level, but they had an important impact on policy and the political process. Japan had one dominant party but not a one-party system.
The ultra-low and negative interest rate environment in advanced economies and its implications for the rest of the world are currently among the top concerns of financial market participants and policy makers worldwide. Mark Carney, the governor of the Bank of England, recently said the low interest rate equilibrium1 is one of the challenges in which the global economy risks becoming trapped.
Relations have been good between Singapore and Indonesia, but challenges still lie ahead. The upcoming leaders’ retreat for Singapore’s Prime Minister Lee Hsien Loong and his Indonesian counterpart, President Joko Widodo, will coincide with the golden anniversary (50 years) of formal diplomatic ties between the two nations. Considering how far bilateral relations have come, this is certainly an occasion for celebration.
Africa is becoming a new strategic playground where economic and geopolitical rivalry between Asian powers compels Japan to compete in a contemporary struggle for influence. Japan’s decision to hold the Sixth Tokyo International Conference on African Development (TICAD) on African soil in August 2016 — for the first time in TICAD’s 23-year history — is just one example of its invigorated engagement with the region.
Tomorrow’s Bank of Japan and Federal Reserve meetings are serving to dampen activity in the foreign exchange market. The US dollar is little changed against the euro, yen, and sterling. The Antipodeans are firm.
The US dollar, which finished last week on a firm note, is under pressure to start the new week that features Bank of Japan and Federal Reserve meetings. The slighter stronger August CPI reading helped lift the greenback ahead of the weekend, but investors continue to see a low probability of a Fed hike this week.
