Infinite Unknown

Vehicles bound for export wait in a lot in Yokohama City, Japan on Oct. 27, 2008. Photographer: Haruyoshi Yamaguchi/Bloomberg News

Dec. 30 (Bloomberg) — Japan’s economy will probably shrink at an annual 12.1 percent pace this quarter, the sharpest drop since 1974, as exports collapse, Barclays Capital said.

Gross domestic product in the three months ending tomorrow will fall at almost three times the 4.1 percent rate previously predicted, said Kyohei Morita, chief Japan economist at Barclays in Tokyo, after reports last week showed industrial production and exports posted the biggest declines on record in November.

“Given the speed and the length of the contraction, this recession could be the most severe in the postwar era,” Morita said. “We expect negative growth will continue for a fifth straight quarter to the April-June period of 2009.”

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Tags: Bank of Japan, Economy, Exports, GDP, Japan, Politics

$20 bills at the Bureau of Printing and Engraving in Washington: central banks are taking unprecedented action to increase the money supply by expanding their balance sheets

A quiet revolution in central banking is gathering speed, as the Federal Reserve ploughs ever deeper into the brave new world of unorthodox monetary policy and other central banks ponder how far they might have to follow.

The world’s central banks have already undergone dramatic changes since the start of the credit crisis more than a year ago. They have cut interest rates with unprecedented rapidity - in some cases to historic lows - and have increased bank reserves massively to meet heightened private sector demand for liquidity.

They have become de facto central counterparties in the money markets, and in some cases even direct lenders to companies. Moreover, by making liquidity available against collateral on terms far more favourable than those that prevail in the private markets, they have become in effect catastrophic risk insurers of last resort for whole classes of financial assets - taking on the risk that the crisis could become so bad that they cannot recoup their loans.

But the latest steps by the Federal Reserve - which cut interest rates virtually to zero last week and said it would create money to finance ever-larger credit operations - break new ground.

Related:
- The Neo-Alchemy of the Federal Reserve by Ron Paul
- Interview: Peter Schiff still grim on future

Already the Fed arguably has one companion, the Bank of Japan. The BoJ cut rates to nearly zero on Friday, stepped up its purchases of government bonds and said it would buy commercial paper.

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Tags: Bank of Japan, Bonds, Economy, Fed, Federal Reserve

The Bank of Japan today cut interest rates to 0.1% in another attempt by central banks around the world to drag the global economy out of recession.

The bank’s eight board members voted 7-1 to lower the basic lending rate from 0.3% to 0.1%, following a cut from 0.5% to 0.3% at the end of October.

The decision comes days after the US Federal Reserve voted for record low interest rates of between zero and 0.25%. This month the Bank of England slashed interest rates to 2%, their lowest level in 57 years, and is reportedly considering another cut when its board meets next month.

The central bank governor, Masaaki Shirakawa, described the decline in the global economy as “the most rapid in our lifetime” and said he could not rule out further cuts.

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Tags: Bank of Japan, Economy, Japan, Rate Cut, Recession

An undated company handout photograph shows Toyota Motor Corp. vehicles bound for export at the company’s Tahara plant in Tahara, Aichi Prefecture, central Japan, released to the media on Oct. 28, 2008. Source: Toyota Motor Corp. via Bloomberg News

Nov. 17 (Bloomberg) — Japan’s economy, the world’s second largest, entered its first recession since 2001 last quarter and the government and economists say conditions may get even worse.

Gross domestic product shrank an annualized 0.4 percent in the three months ended Sept. 30, the Cabinet Office said today in Tokyo. Economists predicted the economy would grow 0.1 percent after contracting a revised 3.7 percent in the previous period.

The slowdown may deepen as the global financial crisis hurts exports, prompting companies from Toyota Motor Corp. to Canon Inc. to slash profit forecasts and cut investments. Japan has the lowest interest rates among the 20 biggest economies and public debt that exceeds 180 percent of GDP, limiting the government’s ability to stimulate growth.

“It’s only going to get worse,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Japan may be entering its deepest recession in a decade as the global financial crisis cools demand overseas.”

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Tags: Bank of Japan, Economy, Financial Crisis, GDP, Japan, Recession

Sept. 29 (Bloomberg) — The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks to $620 billion from $290 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand to $450 billion from $150 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed’s expansion of liquidity, the biggest since credit markets seized up last year, comes as Congress prepares to vote on a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, forcing European governments to rescue four banks over the past two days alone.

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Tags: Bailout, Bank of England, Bank of Japan, Bankruptcy, Congress, Credit Crisis, Credit Crunch, ECB, Economy, Fed, Federal Reserve, Government, Lehman Brothers, mortgage crisis, Mortgages, Politics, Stock Market, Wall Street

Sept. 18 (Bloomberg) — The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the 1920s.

The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion “to address the continued elevated pressures in U.S. dollar short-term funding markets.” The Bank of England, the Bank of Canada and the Swiss National Bank also participated.

Policy makers have struggled to revive confidence in markets this week as investors stockpiled money on concern more financial institutions would fail after the bankruptcy of Lehman Brothers Holdings Inc. and the U.S. government bailout of American International Group Inc. The cost to hedge against losses on U.S. government debt climbed to a record yesterday.

“There’s a complete lack of faith in the markets,” said Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London. “There’s a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.”

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Tags: Bank of Canada, Bank of England, Bank of Japan, Canada, Credit Crisis, Credit Crunch, ECB, Economy, Fed, Federal Reserve, Financial Crisis, Japan, Lehman Brothers, mortgage crisis, Mortgages, Politics, Swiss National Bank, U.K.