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Analysts at Nomura point out that the Japanese Prime Minister Shinzo Abe and others from the government and Cabinet have been making remarks suggesting a change of position on the “exit” from the Bank of Japan’s monetary easing and on the 2% price stability target.

Key Quotes

“In response, expectations have grown that the BOJ might avail itself of the government’s change of position and advance with normalization of monetary policy.”

“That said, we think there are circumstances that force the BOJ to stick with its 2% price stability target, therefore preventing it to move toward an “exit”.”

“We think the government and Cabinet have indicated plans to seek an “exit” from monetary easing because public opinion is not necessarily in favor of a 2% increase in prices that leads to lower real purchasing power, and because Prime Minister Abe himself would like to wrap up or bring to a close some of the initiatives taken under his administration now that his party’s leadership race is over.”

“We think the BOJ is unable to follow along with this and is being put in a position of having the rug pulled from under it as the government and Cabinet try to orchestrate an “exit”.”