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Bank of Japan surprises the markets

This is the FT News Briefing podcast episode's audio transcript: Markets are stunned by Bank of Japan.

Jennifer Smith

Bank of Japan surprises the markets

From the Financial Times, good morning. Today is December 21st, a Wednesday. This concludes the FT News Briefing.

Markets shook when Japan's central bank finally gave in. The line for refunds is being pushed forward by a group of FTX clients. Tom Wilson of the FT also takes a look back at the eventful year in the energy markets.

Wilson, Tom

I mean, this chapter would actually be called "Russia" there, wouldn't it?

Jennifer Smith

The news you need to start your day is presented by me, Jess Smith, who is filling in for Marc Filippino.

Markets were alarmed by the Bank of Japan's unexpected change in monetary policy. The central bankers of Japan had long maintained an ultra-loose monetary policy and refused to raise interest rates with other central banks. However, BOJ officials, including governor Haruhiko Kuroda, announced Wednesday that they will permit 10-year bond yields to move by 5% rather than a quarter of a percent. The hawkish message that markets have been getting has been amplified, according to Jennifer Hughes of The FT.

Theodora Hughes

It seems like the top central bankers in the world were competing in a game of "hold my drink." Jerome Powell of the Fed sort of emphasized on Wednesday that there is still a long way to go before we achieve price stability. Then, the European Central Bank's Christine Lagarde became even more hawkish the following day, sort of having her "hold my beer" moment. And now we have Kuroda, who has been the only person to remain steadfast in his support of the extreme easing strategy. And now he has also attended the party.

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Jennifer Smith

Jen, did the market's response stem from the Bank of Japan's actions or their interpretation of what it signifies for the future of monetary policy?

Theodora Hughes

Both aspects are present. We shouldn't anticipate the BOJ to abruptly abandon its existing set of regulations and follow the Fed and ECB in accelerating interest rate increases any time soon, in my opinion. As a result, the governor, Haruhiko Kuroda, is retiring in 2019. He has consistently insisted that inflation is temporary. Earlier this year, the government intervened in the currency markets and spent billions to support the yen. The fact that we are now witnessing an unexpected move suggests that the next governor of the Bank of Japan may modify policy more drastically, which will have a significant impact on the Japanese markets.

Jennifer Smith

Jennifer Hughes, the FT's US markets editor, is pictured here.

Sam Banks:

Fried is anticipated to go from the Bahamas to the US after having signed extradition paperwork. There are fraud allegations against the former CEO of the now-defunct bitcoin exchange FTX. Meanwhile, other lawsuits have been filed against his former employer. A group of FTX customers who have a combined $1.6 billion stranded in the bankrupt corporation have filed the most recent lawsuit. They are working hard to get their money back as soon as possible. Josh Oliver of the FT is shown here.

Jeremy Oliver

The crucial aspect of this legal action is that it will ultimately concern the assets of the clients and if a sizable chunk of the money at stake in this bankruptcy will be walled off and essentially returned to clients as quickly as possible. The question is, do these assets still legally belong to the consumers or do they now belong to FTX, the bankrupt business that had held custody of the customers' assets? And that has an impact on how the remaining assets that belong to FTX and all of its affiliated firms are distributed among the other creditors.

Jennifer Smith

How do you now anticipate that the FTX crash will impact the larger cryptocurrency market?

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