The Bank of Japan (BoJ) curbed intense market speculation about changes in monetary policy by strengthening its defense of stimulus, which causes a collapse in the yen (-2%) against the dollar and euro, sharp falls in the bond performances and a broad rise in the Japanese stock markets. The Nikkei 225 Index soared 2.5% at the close of trading on Wednesday. Investors were betting on a turn in Japanese rates in order to abandon negative levels like Europe or Switzerland to follow the trail of the credit tightening cycle in most economies.
However, the market has been in for a surprise in Asia’s largest economy. The board of governors chaired by Haruhiko Kuroda kept the main policy adjustments unchanged on Wednesday, leaving its interest rate negative at -0.1% and the target for 10-year debt yields around 0%, according to the statement. his latest statement. Inflation in Japan in November stood at 3.8% year-on-year with an unemployment rate of 2.5% and GDP growth in year-on-year terms hovering around 1.5%.
The central bank said it would continue to buy bonds on a large scale and flexibly increase purchases if necessary, signaling its intent to deal with yield curve control for now. It also improved its provision of loans to commercial banks with the aim of encouraging them to buy more debt. In this way, Japan once again reinforces its ultra-lax rate policy against the cycle of monetary tightening registered in the US and Europe.
The BOJ’s updated forecasts also showed that officials still don’t see inflation sustainably staying above 2% for years to come, offering justification for more stimulus after Kuroda even retires from the government bank in April. central. Precisely, the replacement at the head of the BoJ is one of the arguments to maintain the ultra-expansionary monetary policy and avoid turbulence in the progress of the Japanese markets.
His successor will have to face the decision to put an end to two decades of great monetary expansion in Japan, immersed in a deflationary crisis after the outbreak of its housing crisis in the 1990s after a bubble of great proportions. The Bank of Japan has used the equivalent of around 6% of the country’s GDP in recent months to buy bonds with the aim of keeping yields within its target range.
reduction of visions
On the other hand, the Bank of Japan has presented its new macroeconomic projections for the country, expressing its confidence that activity will recover towards the middle of the forecast period given the minor impact related to the Covid-19 pandemic and the decrease in supply-side constraints, although it expects it to come under downward pressure from high commodity prices and the slowdown.
In this way, the growth rates projected for fiscal years 2022 and 2023 are somewhat lower than in their previous projection of last October. In the case of inflation, the projected rates of increase remain more or less unchanged for fiscal years 2022 and 2023, while for fiscal year 2024 it is somewhat higher.
In this way, the Japanese central bank expects GDP to close fiscal year 2022 with an expansion of 1.9%, compared to the 2% previously forecast, and that in 2023 it will increase by 1.7%, compared to 1.9%. scheduled in October. For the 2024 financial year, the entity anticipates an expansion of 1.1%, compared to the previously expected 1.5%.
In the case of the CPI, the Bank of Japan expects the rate to rise by 3% in 2022, one tenth more than expected in October, to slow down to 1.6% in 2023, in line with its previous estimate, while it expects that prices rise 1.8% in 2024, two tenths more than anticipated.