The governor of the central bank who is not afraid of salary increases, embarrassed Goldman Sachs
| Gal Rekover, Devar News
Japan’s central bank is stirring up markets and embarrassing Goldman Sachs (NYSE: ). The bank’s surprising decision from a week and a half ago, to increase the maximum price of government bonds, misled investors, including the American investment giant Goldman Sachs (NYSE:). , the bank surprised again with an intense sequence of purchases, which curbed price increases and left investors disappointed.
These events are another expression of the unique policy of the leader of the Governor of the Bank of Japan, Haruhiko Kuroda, who is quite different from his fellow governors in the USA and Europe. According to him, raising wages is a source of growth, therefore instead of unemployment and wage erosion, the targets of raising interest rates in the West, Haruhiko is looking for employment and rising wages.
The story started a week and a half ago, when Rohiko announced that the bank would double the yield range for government bonds, allowing it to move up to 0.5% above and below the target, which remained at 0. Investors thought that finally, price increases had caused the Japanese central bank to abandon its expansionary policy The Goldman Sachs economists estimated that this is a turning point, where the Japanese central bank aligns with the other central banks, which are raising interest rates to hurt demand and slow down economic activity.
Investors saw the policy change as an opportunity to rake in an easy profit. A tightening policy, as expected by investors, increases the cost of raising public debt. In such a situation, it pays to sell the current bonds, with a relatively low yield, in order to purchase, afterwards, bonds with a higher yield.
Indeed, the announcement ignited a wave of sales of Japanese bonds, which caused the yield to rise from about 0.25% to about 0.4% (for bonds to ) and the value of El to drop against the dollar. However, a few days later, Haruhiko surprised investors again when, without prior notice, he accelerated bond purchases, curbed the rise in yields and completely reversed the depreciation of the yen, and Goldman Sachs’ assessment turned out to be wrong.
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