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The Bank of Japan shocks the financial world

Here is the text version of the episode of the FT News Briefing podcast: "Bank of Japan shocks markets"

The Bank of Japan shocks the financial world

Jennifer Jessica Smith

The Financial Times wishes you a good morning. The date is now Wednesday, December 21. And that wraps up today's edition of the FT News Briefing.

The Bank of Japan gave in, and the markets shuddered. Many FTX clients are jockeying for position at the refund window. In addition, Tom Wilson of the Financial Times reviews the year's events in the volatile energy sector.

Wilson, Tom

You know, if we were to move this section to Russia, it would be appropriately titled "Russia," no?

Suggested Citation: Jessica Smith

Here's the day's essential news from me, Jess Smith, filling in for Marc Filippino.

The Bank of Japan's sudden change in monetary policy sent shockwaves through global financial markets. Japanese central bankers had maintained their hyper loose monetary policy for a long time, and they had refused to raise interest rates along with their counterparts elsewhere. In contrast, yesterday BOJ officials led by governor Haruhiko Kuroda announced they will permit 10-year bond yields to fluctuate by half a percent instead of a quarter of a percent. According to Jennifer Hughes of the FT, this action by Japan bolstered the hawkish signal being sent to the markets.

Ms. Jennifer Hughes

It's like the world's most powerful central bankers all had a "hold my beer" competition. Fed Chair Jerome Powell hinted at the difficulty of restoring price stability last Wednesday. European Central Bank's Christine Lagarde had a "hold my beer" moment the next day and became much more hawkish than the day before. And now we have Kuroda, the one person who has refused to budge from his radical easing policy. He finally decided to show up to the get-together.

Suggested Citation: Jessica Smith

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Can you tell me, Jen, if the markets reacted to the Bank of Japan's actions or expectations about the future of monetary policy because of them?

Female Performer, Jennifer Hughes

Actually, it combines elements of both. It seems unlikely that the BOJ will abandon its current policy and raise interest rates simultaneously with the Federal Reserve and the European Central Bank any time soon. Haruhiko Kuroda, the current governor, will leave office in 2019. Since the beginning, he has insisted that inflation is only temporary. Earlier this year, the government spent billions supporting the yen by interfering in the currency markets. This unexpected shift in policy bodes ill for Japanese financial markets and signals the next Bank of Japan governor may make more drastic policy changes.

The Smith, Jessica

Jennifer Hughes is the editor-in-chief of the FT's US markets coverage.

Sam Bankman -

Fried has agreed to his extradition and will soon be leaving the Bahamas for the United States. The former CEO of the failed bitcoin exchange FTX is being charged with fraud. His old employer is currently facing a number of lawsuits. A group of FTX customers who are owed a total of $1.6 billion by the bankrupt firm have filed suit. They're making an effort to expedite the return of their funds. Here's Josh Oliver, from the FT.

Oliver, Joshua

When this legal action is launched, it will be crucial to determine the fate of the customers' assets and whether or not a sizable chunk of the money at stake in the bankruptcy will be set aside and returned to the consumers as quickly as feasible. The argument is whether the insolvent FTX corporation now has ownership of the assets in question, or whether the customers still do, given that the assets were theirs to begin with and FTX only retained custody of them. What this means is that the assets owned by FTX and its subsidiaries will be reduced, which will have repercussions for how the remaining creditors are paid.

An Explanation from Jessica Smith

How do you think the FTX failure will ultimately influence the cryptocurrency market as a whole?

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