TOKYO - The Bank of Japan held its first policy decision meeting under Governor Kazuo Ueda. As expected, the BoJ has not changed any policy settings but made significant changes to the statement.
The BoJ has removed its entire forward guidance on rates from the statement, which means that it sees macro conditions as having changed meaningfully and monetary policy is now in need of a new approach. This naturally leads to the need for a policy review as suggested in today's meeting. At least one year has been suggested for this review. We think today's BoJ action was well-orchestrated in the sense that it secures flexibility for future policy changes while curbing market expectations of an early rate hike.
Governor Ueda clearly messaged to the market that the BoJ's easy policy will be maintained for a while as premature tightening could threaten the fragile recovery and the Bank will monitor inflation to see whether it can be sustained above 2% persistently. Inflation is key to determining the actual timing of a rate hike decision. Although the BoJ suggested it could take a year to 18 months to review policy, the BoJ's actions won't be bound by it. At the press conference, Governor Ueda confirmed that even as the review is continuing, the board will make policy decisions at each meeting and decide whether a policy change is needed. ...continue reading
Source: ANNnewsCH
