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Deputy Governor Wakatabe Pushes Back Against Idea Of Tightening

BOJ

BoJ Deputy Governor Wakatabe plays down speculation re: the need for the BoJ to adjust its monetary policy settings noting that “under the floating exchange rate system, central banks should basically focus on stabilizing their own economy, and the normalization of monetary policy in Japan is associated with achieving the Bank's price stability target in a stable and sustainable manner. Given the current situation where Japan's economy has finally started to pick up from the pandemic, it is definitely too early for the Bank to start tightening monetary policy when the target has not yet been achieved as this could hinder the economic recovery.”

  • The speech also covers thoughts on what the attainment of the central bank’s inflation goal would look like.
  • Note that the BoJ has not been insulated from the broader hawkish repricing when it comes to major global central banks. Japan’s 2-Year OIS rate has been testing 0% in recent weeks, a level that has not been sustainably broken since early ’16 (when the BoJ adopted negative interest rates).
  • A reminder that BoJ Governor Kuroda has pushed back against speculation surrounding tweaks to the Bank’s YCC scheme in recent weeks.

Fig. 1: Japan 2-Year OIS Rates (%)

Source: MNI - Market News/Bloomberg


MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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