Bank of Japan’s 2008 Crisis Miscue Offers Messaging Lesson for Kuroda

(Bloomberg) -- Unintended signals given by the Bank of Japan at the height of the global financial crisis serve as a fresh reminder to current Governor Haruhiko Kuroda of the importance of effective communication to sensitive markets.

A detailed record of BOJ policy meetings after the collapse of Lehman Brothers Holdings Inc. in 2008, released Tuesday, shows how board members argued with then Governor Masaaki Shirakawa about the likelihood of causing market confusion at a meeting on Oct. 31 that year.

Bank of Japan’s 2008 Crisis Miscue Offers Messaging Lesson for Kuroda

Instead of a reassuring investors with their decision to cut interest rates, the BOJ’s policy statement triggered a renewed rise in the yen and another 5 percent slide on the Nikkei 225 stock index.

While the board had been almost unanimous in favor of a cut and debate was largely limited to the size of the cut, the statement left the matter unclear, simply saying the vote to lower borrowing costs was evenly split. Shirakawa, who had made the casting vote in favor of the cut, pushed back against suggestions to provide more information on the vote in the statement.

This came after the BOJ had earlier in October stayed out of a coordinated global effort to lower borrowing costs and also after an emergency meeting a week later at which it left rates unchanged.

©2019 Bloomberg L.P.