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Morning comment: No BoJ surprises

Chris Scicluna
  • After the BoJ pulled no surprises overnight, all eyes remain on the bond market. 

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Japan: Everything under control in 2017?

  • Japan’s economic recovery looks set to be maintained in 2017, supported by both domestic and external demand.
  • But while inflation will move gradually higher, it will remain some way below target, and so the BoJ will be in no rush to amend its yield curve control policy. 

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Kuroda does what he can (but it won’t be enough)

  • The BoJ announced a yield curve control framework and its commitment to over-achieve on its inflation target.
  • But without a fundamental shift in the macro policy mix, rates may have to stay at or below current levels for the next decade or beyond.

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Can the BoJ reduce collateral damage?

For a man who had got used to generating reams of positive headlines in his early days as BoJ Governor, Haruhiko Kuroda’s recent meetings have fallen flat. The surprise introduction of negative rates at the start of the year received distinctly mixed reviews, while last week’s failure to do little more than announce a small increase in purchases of ETFs proved distinctly underwhelming.

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The BoJ and its (sort of) negative interest rate

  • Kuroda once again pulled a headline-grabbing rabbit out of the hat, with the announcement of a ‘negative’ interest rate on excess reserves.
  • But, as ever with recent BoJ announcements, the devil is in the detail.
  • And today’s announcement could well mark the beginning of the end for a QQE programme that has proved successful in raising underlying inflation.

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