The financial markets have been volatile, due to the implications of the Bank of Japan’s (BoJ) comprehensive assessment next month. Therefore, will the BoJ reduce its stimulus or can we expect super BoJ easing measures next month?
18 August, AtoZForex – The planned review of BoJ’s policy next month has sparked volatility and uncertainty in the financial market. As questions have been raised over the consequences of the review on the direction of the Prime Minister Shinzo Abe’s plan to end deflation. The possible implications of the review have pushed the yen above the 100 mark against USD.
Investors are currently speculating that the Bank of Japan will utilize the monetary policy review of September, as an opportunity to downsize its stimulus package. However, the Prime Minister Shinzo Abe’s advisor, Etsuro Honda has rejected this market speculation today. Instead, he believes that the situation could even set the central bank for super BoJ easing measures in September.
Abe’s advisor questions the need for the review
In regards to the review, Mr. Honda mentioned in a recent interview that there is no need for the assessment. Mr. Honda stated that the outcome of the review at next month’s policy meeting is already obvious: “However they conduct the assessment, there is already an answer: Monetary policy hasn’t been eased enough.”
Explaining his view, Etsuro Honda said that overseas factors and increased sales-tax, canceled out the impact of BoJ monetary easing. Hence, in his eyes “the only policy implication” the review will generate is the need for the BoJ to ease policy further. Even if the BoJ changes its stimulus after the review without achieving the 2 percent inflation target, Etsuro Honda said that “we would never, ever be able to get out of deflation.”
More than 50% of possibility for super BoJ easing measures
A number of BOJ board members and economists have expressed their concerns about the possible implications of BoJ’s easing measures. They fear that the central bank will be unable to expand its purchases of government debt. Furthermore, the US has made clear that they will oppose any direct actions of the BoJ to influence the yen.
“I think it is fine for us to take bolder policy measures , no matter what the U.S. may say,” Adding further to this, the advisor of Shinzo Abe believes that there is “more than a 50% possibility of bold monetary easing measures” for next month.
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