MNI INSIGHT: BOJ Looks At Guidance As Others Drop Theirs

The Bank of Japan is looking at revising its monetary policy statement forward guidance following recent moves by its central banking peers to drop theirs, but is unlikely to abandon it entirely in the immediate future, MNI understands.

The Federal Reserve, European Central Bank, Reserve Bank of Australia and the Bank of England have all rowed back on forward guidance in recent months to increase the flexibility of monetary policy as they look to tame inflationary pressures.

The BOJ sees no need to drop guidance entirely anytime soon, as inflation – though picking up – is still at low levels and unlike the other banks, its policy remains on an easing path.

PREVIOUS MOVES

However, Japanese policymakers have previously been influenced by decisions of the Fed and others.

In February 2012, the BOJ introduced a price stability goal following the Fed’s move to a 2% price target in January 2012, albeit with an initial goal of 1%.

In June 2015, the BOJ reduced the frequency of policy-decision meeting to eight annually from 14, putting it in a similar cycle to the other major central banks.

The bank currently says it will continue with its yield curve control policy for as long as necessary for maintaining its 2% inflation target in a stable manner, and that it expects short- and long-term policy interest rates to remain at their present or lower levels.