Senior Economist at UOB Group Alvin Liew gives his views on the recent BoE event.
Key Quotes
“The Bank of Japan (BOJ) kept its monetary policy stance, policy rate, – its forward guidance, and economy & price outlook unchanged in the Sep Monetary Policy Meeting (MPM) decision today (19 Sep). The BOJ pledged that it “intends to maintain the current extremely low levels of short- and long-term interest rates for an extended period of time, at least through around spring 2020″¦” while Yield Curve Control and other monetary policy measures were also unchanged”.
“The BOJ added a new paragraph at the end of the statement emphasizing the loss of momentum in achieving the inflation target, which further convinces the markets that the BOJ is getting ready for another round of easing measures”.
“In his press conference, BOJ Governor Kuroda reiterated the BOJ will examine the economy and prices closely in the next Oct meeting and will not hesitate to take easing action if necessary. Kuroda added that he is more positive about additional easing compared with the previous meeting, pointing to overseas economies where there is no sign of recovery. He also repeated the wide repertoire of easing options available to BOJ including cutting short term interest rates deeper into negative territory, lowering BOJ’s yield curve control target of zero for 10-year JGB, boosting asset purchases, and accelerating the monetary base expansion. But Kuroda also assured savers that there is “no chance” that deposit rates will turn negative”.
“After the Sep MPM, it is evidently clear that the BOJ will ease soon. Emphasis of risks from overseas impacting Japan and a stronger yen further add to the easing view while the additions in the Jul and Sep MPM statements further confirmed the BOJ is ready to do more easing measures. The question is which easing option and to what extent it will be effective given that the BOJ has already pushed the easing envelope aggressively in the last decade”.
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