The Bank of Japan astonishes the markets

This is an audio transcript of the podcast episode of FT News Briefing. The Bank of Japan surprises markets.

Jennifer Smith

Greetings from the Financial Times! Wednesday, December 21st is today. This concludes your FT News Briefing.

The central bank of Japan ultimately capitulated, and markets panicked. A bunch of FTX customers are vying for the front of the refund line. Tom Wilson of the Financial Times reflects on an eventful year in the energy markets.

James Wilson

This chapter would actually be titled "Russia" there, wouldn't it?

Jennifer Smith

I'm Jess Smith, filling in for Marc Filippino, and here's the morning news you need to know.

The Bank of Japan's sudden adjustment in monetary policy shook the markets. Japan's central bankers had long adhered to an ultra-loose policy, and they refused to raise interest rates alongside other central banks. Officials of the BOJ, led by Governor Haruhiko Kuroda, announced yesterday that they will now allow 10-year bond yields to fluctuate by 0.5 percentage points instead of 0.25 percentage points. According to Jennifer Hughes of the Financial Times, Japan's action amplified the hawkish message markets have been receiving.

Jessica Hughes

It's as if there was a "hold my beer" competition among the world's leading central bankers. Jerome Powell of the Federal Reserve emphasized on Wednesday that we have a long way to go before achieving price stability. The following day, Christine Lagarde of the European Central Bank (ECB) had a "hold my beer" moment and became even more hawkish. And now we have Kuroda, who has steadfastly adhered to this radical easing policy; he has been the only one who has refused to budge. And now he has also arrived at the celebration.

Jennifer Smith

Jen, did the markets respond to what the Bank of Japan did or what they believe it indicates for the future of monetary policy?

Jennifer Hughes

It is a combination of both. I don't believe it's likely that the BOJ will abandon their current monetary policy very soon and follow the Fed and ECB in raising interest rates. The current governor is Haruhiko Kuroda, who will stand down next year. He has been insistent that inflation is temporary. Earlier this year, the government spent billions to stabilize the yen by interfering in the currency markets. This unexpected change signals that the next governor of the Bank of Japan will alter policy dramatically, which will have a significant impact on the Japanese financial markets.

Jennifer Smith

Jennifer Hughes is the US markets editor for the FT.

Sam Bankman-

Fried has signed extradition documents and is anticipated to return from the Bahamas to the United States. The former leader of the collapsed bitcoin exchange FTX is facing fraud charges. Several lawsuits have been filed against his former company. The most recent legal action being brought by a group of FTX clients who have $1.6 billion stranded in the bankrupt corporation. They are attempting to recover their funds more swiftly. Josh Oliver of the FT is shown here.

Joshua Oliver

Importantly, when this legal action is conducted, it will be about the customers' assets and whether a large amount of all the money at stake in this bankruptcy will be protected and essentially returned to customers as quickly as feasible. The dispute is whether FTX, the insolvent corporation, owns these assets or whether they still legally belong to the customers, given that they were the customers' assets all along and FTX only retained custody of them. And this impacts the remaining assets owned by FTX and all of its affiliated entities that will be distributed among the other creditors.

Jennifer Smith

How do you anticipate the FTX crash to impact the cryptocurrency market at this time?