In the fairytale, his egg misplaced before birth, the ‘ugly duckling’ is born into a flock of ducks. Being ugly, the poor little duck is beaten and ostracised, only to reveal himself as a graceful swan after a troubled youth, admired by all. So it will be with Governor Kuroda-san at the Bank of Japan. His egg, however, has yet to hatch…
Kuroda-san needs to get the inflation rate in Japan up to 2% or suffer horrible shame and loss of face. For the microeconomic reasons I have articulated previously (he can give the people money but he can’t make them spend!) he is doomed. Valiantly, he has promised to double, or maybe quadruple, or maybe just buy without limit, as many assets as the BoJ can print the money to buy. But this won’t force Ms Watanabe to do anything other than deposit her Yen in the Postal Savings Bank.
Kuroda-san’s ‘ugly duckling moment’ will come in two years’ time when the inflation rate has not budged and he is disgraced…so wherein cometh the Swan?
Kuroda-san has entered a trade that makes every hedge-fund manager salivate – the ability to buy almost limitless amounts of something with limitless amounts of nothing. The trade goes like this:
Kuroda-san: Hi, I’m Kuroda from the BoJ and I want to buy all of Fifth Avenue, Bond St and can you throw in half of China?
The world: Sure, how do you want to pay for that?
K: Do you take Yen?
TW: Sure…nice doing business
Yes folks, the Nihon ugly duckling may well fail to debase his currency, but he sure is going to make many generations of Japanese super wealthy in the meantime. Behold Kuroda the Swan