2023-09-19 07:55:12
Bloomberg Economics (BE) predicts that Bank of Japan Governor Kazuo Ueda will strike a somewhat hawkish tone when the monetary policy meeting concludes on the 22nd. That’s not because the Bank of Japan is close to changing policy. Rather, it appears that the governor is aiming to curb the depreciation of the yen, which is making it difficult to maintain the easing measures that are necessary for the Japanese economy.
An excessive or rapid depreciation of the yen would raise the cost of imported fuel and food, creating an unacceptable burden on consumers. A hit to demand would push the Bank of Japan further away from its goal of achieving sustainable inflation.To counter these risks, Governor Ueda said it would be unsafe to bet on a unilateral decline in the yen. Governor Ueda, who BE believes will try to make speculators aware of the issue, is expected to pursue the hawkish line he showed in a recent interview with the Yomiuri Shimbun. The governor indicated that he was open to the possibility of lifting negative interest rates earlier than the market expected.At this week’s meeting, the Bank of Japan announced that it would keep its short-term policy rate unchanged at -0.1% and that the 10-year government bond yield would rise. BE predicts that the Bank will decide to maintain policy management, which effectively raises the upper limit of permissible fluctuations to 1%, so that it remains at around 0%. This is the view of all 46 economists surveyed by Bloomberg News, and the Bank of Japan is expected to maintain policy through the first half of next year (January-June). The US Federal Reserve appears to be at or nearing the end of its rate hike cycle, making it easier for the Bank of Japan to maintain an accommodative stance in the coming months.However, this is an extremely uncertain situation.Related article:[Insight]Governor Ueda’s real intention is not to lift negative interest rates, but to respond to the weaker yenRelated article: Bank of Japan Governor Ueda’s method for policy normalization is called “shock and awe” is a different approach
Original title: BOJ PREVIEW: Policy on Hold, Ueda’s Task Is to Rein in Weak Yen (excerpt)
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