The Bank of Japan kept ultra-low interest rates on Friday and maintained its dovish guidance, saying that risks to the economic outlook were skewed to the downside. Here are some analysts’ views on the decision, reaction to BOJ Governor Haruhiko Kuroda’s comments at his post-meeting news conference and market reaction:
SAKTIANDI SUPAAT, REGIONAL HEAD OF FX RESEARCH & STRATEGY, MAYBANK, SINGAPORE
“It looks like policy-wise, it’ll remain the same. But he did mention that he wants less volatile FX, so I think the intervention will be there to ensure the volatility is not too high.”
ALVIN TAN, HEAD OF ASIA FX STRATEGY, RBC CAPITAL MARKETS, SINGAPORE
“You can still hear from Kuroda that he remains quite ambivalent, actually, about yen weakness. And he’s still basically wedded to the current policy settings of the BOJ. It’s basically telegraphing to the world that he’s not going to change tack anytime soon.”
NAKA MATSUZAWA, CHIEF JAPAN MACRO STRATEGIST, NOMURA, TOKYO
“Governor Kuroda has been quite dovish in the last couple of meetings but he sounded more upbeat this time. He said they’re getting closer to the inflation target, so there’s a little bit of progress. He also said wages could rise more than expected.
“I don’t know that we are close to a policy change, but we are a bit closer to a tweak at least. His comments after this meeting don’t directly deny market speculation that a tweak could be coming soon. I don’t think it will happen this year though. I think it will happen next spring, for two reasons: one is they want to watch the spring wage negotiations; and two, they also want to see the Fed to pause the rate hike process and stabilize the market.”
NICHOLAS SMITH, CLSA, JAPAN STRATEGIST, TOKYO
“Rates will go up from the beginning of April. And so you wouldn’t dare trade on that until (BOJ Governor Haruhiko) Kuroda goes …
“The thing to watch out for is rumbles in the bond market. The zero rates in Japan caused all kinds of perverse things to be had in global markets. So the risk is something very odd happens in global bond markets. “I think the BOJ is perfectly capable of controlling interest rates…The BOJ just printed four and a half trillion dollars and bought 55% of the bond market. So if you try to take on the Bank of Japan, you do risk getting your face ripped off.”
MARCEL THIELIANT, SENIOR ECONOMIST AT CAPITAL ECONOMICS
“At first glance, (the upgrade in inflation forecasts) suggests that the bank is moving closer to tightening policy. However, we wouldn’t read too much into those numbers.
“With the government set to announce subsidies to electricity prices that could knock off as much as 1% point from inflation, inflation will be below 2% from early next year already. And with the global economy set to enter recession, the window for tighter policy is closing rapidly.”
HIROAKI MUTO, ECONOMIST, SUMITOMO LIFE INSURANCE CO, TOKYO
“Basically it was no surprise as there was no change to the monetary policy besides how the BOJ buys ETFs, which was in line with the previous stance that the BOJ no longer buys ETFs unlimitedly – a de-facto tapering.
“BOJ’s price outlook appears to have shifted significantly. Previously, their view stressed a one-off inflation and it’s likely fade-out when excluding food and energy items. Now, the latest figures indicate their acknowledgement of cost-push inflation’s spill-over onto the consumer level.”
MASAYUKI KICHIKAWA, CHIEF MACRO STRATEGIST, SUMITOMO MITSUI ASSET MANAGEMENT, TOKYO
“It is interesting that the BOJ raised the outlook for inflation, but it is still saying it is transitory.
“People were paying attention to the BOJ’s inflation outlook.
“Probably there’s some debate about whether the acceleration in the inflation rate will be temporary.”
KYOHEI MORITA, CHIEF ECONOMIST, NOMURA SECURITIES IN TOKYO
“The BOJ will continue to be lagging behind the U.S. and Europe in tightening monetary policy. In fact it won’t be able to raise interest rates at least until the fiscal year beginning in April 2024, given that the pace and extent of inflation both undershoot that in the West.
“I think it’s natural for the government to focus on targeted fiscal spending to ease the pain of price hikes, while the BOJ continues with monetary easing in the name of policy mix.”
TAKAFUMI YAMAWAKI, HEAD OF JAPAN RATES RESEARCH AT J.P.MORGAN SECURITIES JAPAN
“The outcome (of the BOJ’s policy meeting) was in line with expectations. Investors were buying bonds to cover their short positions ahead of the meeting so that was a sign that the market also had expected this.
“Yields may have not peaked yet, but the global trend of rising yields seems to be pausing now, which has made it easier for the Bank of Japan to keep its yield curve control policy.”
The yen fell about 0.4% to a session low of 146.90 per dollar after the BOJ’s decision, but later reversed losses to eke out a marginal gain. It last stood at 147.07 per dollar.
The benchmark 10-year bond yield fell to its lowest in nearly four weeks. (Reporting by Tokyo Newsroom and Asia Markets Team; Editing by Jacqueline Wong)
Leave a Reply