BoJ Defied Expectations - BBH
Research Team at BBH, suggests that the Bank of Japan defied
expectations and its economic assessment and left policy unchanged.
Key Quotes
“The
inaction spurred a 3% rally in the yen and an even larger slump in
stocks. The financial sector took it the hardest and dropped almost 6%.
The yen's surge helped underpin other Asian currencies, especially the
South Korean won, which gained nearly 1%.
The BOJ did do
something. It cut its inflation and growth forecasts and delayed for
the fourth time in around a year when it would achieve its inflation
target. It now stands at some time in the next fiscal year. We have
long argued that it is unhelpful for the BOJ cast its inflation target
as a near-term objective. Other major central banks are talking about
their inflation target as a medium-term objective, and this provides
more degrees of freedom.
BOJ Governor Kuroda sounded dovish,
and pressure to ease policy in the coming months, perhaps in July,
remains possible. The ostensible argument for standing pat is to
monitor the impact of the recent easing. However, the BOJ's economic
forecasts are consistent with the aggressive easing having little
positive impact. Some speculate that Kuroda was sending a message to
the Abe government, consistent with the G7/G20 concerns about the
over-reliance on monetary policy. The lack of new monetary action may
add pressure on the government for a bolder fiscal policy initiative.”
