Business / Economy

Bank of Japan policy meeting minutes show difficulty of predicting Lehman collapse


Minutes from Bank of Japan meetings from January to June 2008, released to the public Tuesday, show that Policy Board members had difficulty reading signs of the impending collapse of U.S. investment bank Lehman Brothers.

At the policy meeting in June 2008, when the world was faced with financial uneasiness stemming from the U.S. subprime loan problem, then-BOJ Gov. Masaaki Shirakawa said, “The worst, or a crisis of a major bank collapsing suddenly, is perhaps behind,” according to the minutes.

The remark shows that the BOJ chief was unable to predict Lehman’s failure that occurred three months later and triggered an unprecedented global financial crisis.

Following U.S. financial giant JP Morgan & Chase Co.’s rescue takeover of ailing U.S. brokerage house Bear Stearns in March of that year, concerns over a possible financial crisis appeared to have receded.

At the BOJ meeting in early April, one of the Policy Board members, Seiji Nakamura, said “the market confusion has come to a lull.”

“Excessive pessimism is being corrected,” member Miyako Suda said at the Policy Board’s meeting in late April.

The minutes showed that concerns over the possibility of higher crude oil prices leading to inflation overwhelmed worries about a possible financial crisis.

At the June meeting, Shirakawa said he thought a collapse of a major financial institution could be avoided.

In response to this view, board member Atsushi Mizuno said, “We’d better not easily say the worst is behind.”

Policymaker Tadao Noda said, “No one knows whether the biggest risk of ‘sudden death’ is really gone.”

The minutes suggest that some BOJ policymakers did feel uneasy about the future but were unable to foresee the imminent collapse of Lehman and thus failed to have concrete discussions about measures to be taken to prepare for a possible financial crisis.