BoJ Leaves Policy Stance Unchanged, Optimistic On Global Economy

Having briefly injected some anxiety into markets over reported comments last week about paring back easing in 2019 (which were swiftly denied), Kuroda is likely to err on the dovish side in his comments after BoJ left all monetary policy levers unchanged.

Consensus expectations are that the BOJ to leave all its key policy settings unchanged:

  • likely to keep the short-term rate at -0.1% and target for the 10-year JGB yield at around 0%

  • also likely to maintain the current pace of purchases of exchange-traded funds and real estate investment trusts

  • The BOJ is likely to retain its guideline on the annual pace of JGB accumulation at 80 trillion yen

  • Post-meeting comments by Kuroda are likely to be calibrated to avoid stoking upward pressure on the yen. That means he’s likely to avoid specifics if asked again about how or when the BOJ could manage an exit from extreme stimulus.

And that is what we got. All policy levers unchanged.

There was one dissenter – same as before – this guy not only wanted more NIRP, but also more QE, clearly unaware that the BOJ already owns more than half of all Japanese govt bonds.

  • BOJ Board Member Kataoka Votes Against Keeping Rates Unchanged

  • BOJ Kataoka: Should Take Additional Easing if Delay in Hitting Inflation Target

  • BOJ Kataoka: BOJ Should Lower Yields on JGBs of 10-Years and Longer

Language surrounding the global economy is more optimistic.

And don’t forget there lots of new faces on the BoJ…

For now, Kuroda has made clear the bank remains committed to powerful easing and will stay the course until the inflation target is met. Even though the economy grew better than expected in the fourth quarter, there’s no shortage of worry spots.

And as Bloomberg’s Chris Anstey concludes, all in all, very little change here, as we expected. The news on the BOJ, if any, today is going to come from Governor Kuroda’s press briefing this afternoon. The key questions there will be about his recent comments about starting to think about exiting from stimulus around next year.

Of course, do not forget, The BOJ’s purchases of exchange-traded funds have helped boost Japanese stocks. Bloomberg’s Min Jeong Lee and Nobuyuki Akama show the effects on the Nikkei 225 Stock Average against a history of the BOJ’s ETF buying.

 

Nikkei 225 jumped after-hours on the back of US-Korea headlines but that has all faded…