Académie des Sciences Morales et Politiques

Le détail de l’article en japonais est disponible sur le site du journal Nikkei.

On financial market risks
“Nonbank financial institutions are currently the greatest risk in the financial market. The Financial Stability Board ( FSF) is working on regulation policies for a wide area of nonbanks. I consider all of them to be equally important.”
“Controlling non banks is a much more complicated affair compared to regulating commercial and investment banks, and there is immense work to be done.”
“A lot of things need to be done for Money Market Funds (MMFs) , some programs of the FSF are scheduled to be done towards the end of next year. Open Ended Funds ( OEF’s) are also a very important. MMFs and OEFs are clearly issues that are very important . ”
“Even commercial banks cannot be completely excluded to be potentially problematic, but they are in a situation which is much better than any moment of the Great Financial Crisis. We went through intense global financial problems with Covid, but the resilience of the banks was quite remarkable . Again I do not exclude the possibility of bank’s bankruptcies, but I consider the likelihood of such events in the banking sector to be less probable than in the time of the Lehman Brothers collapse .”

On inflation and monetary policy
“The ECB and its governors have made firm commitment to come back to around 2% inflation in the mid-term, which I interpret to be in around 3 years from now on. Jay Powell and Christine Lagarde have made clear commitments to tackle inflation and I have faith in both Central Banks to act accordingly. In the US, EU and in Japan we all have the same definition of price stability- around 2% – , which makes the commitments by these central banks to be even more reliable. We will see what will be done but the ECB has a clear intention to continue to raise rates as Lagarde has said.”
“There is a difference of rates between the two sides of the Atlantic, although the goal of monetary policies of the two regions are the same, 2% in mid-term. This difference has its stems in the fact that the European economy is much more profoundly touched compared to the US by factors such as soaring commodity prices and the war in Ukraine. The central banks will do everything to make core inflation, which is currently in both the US and EU at a considerable level of around 6.5%, to go down progressively around 2%.”
“The central banks will need to be reliable enough -and I consider them to be so- to persuade all economic agents , households , enterprises, employees, workers, that we will see a return to 2% in the medium term . If inflation expectations are correctly anchored in the medium term, our economies will be more preserved from the «second round » inflationary pressures . ”
“The worst recession comes when we lose control of inflation. Paul Volcker was met with 14% inflation in the US, and this level of inflation was well on the way to be persistent given the very accommodative monetary policy up to that time. The following recession was very deep and also resulted in a financial crisis.”
“The Fed and the ECB need to do everything to avoid that kind of high inflation which can be damaging to all areas of economy. I believe the two central banks to be very determined to
2022-083.Mr Trichet nikkei interview BROUILLON
bring back inflation rate to around 2%, and their policies may participate in a slow-down in the American and European economy. Persistent high inflation, however, would bring about a much worse recession.”
“Citizens never like recessions of course . But that is not what we should be asking ourselves. Inflation is particularly striking for the poorest and the most vulnerable. Fighting inflation is protecting the most vulnerable . And let us not forget that very high persistent inflation is always followed by a even deeper and more damaging recession.”

Votre avis sur l’ajustement de la politique monétaire de la Banque du Japon ? Considérez-vous que c’était une décision juste ? Est-ce que la Banque du Japon devrait continuer à progresser vers une normalisation de leur politique ?
“The decision of Bank of Japan was completely unexpected: it came as a surprise for all market participants. From that standpoint it was a success.
“My understanding is that BOJ wanted the market to be communicated simultaneously 3 messages :- 1- The range of YCC is significantly enlarged; -2- It means a potentially more active bond markets; -3- But does not mean an increase of interest rates . Point 3 was stressed strongly by Governor Kuroda .
“That being said the increase of the ceiling of the range is necessarily interpreted by market participants as facilitating , later, some interest rate increases . It is therefore not surprising that the immediate response was : Yen going somewhat up ; Japanese stocks somewhat down; and global long term interest rates going slightly up.
“We will see how the market will stabilize in the days to come . Immediate market responses are not necessarily entirely reliable …”