The timing of the next policy change expected by economists has been delayed significantly after the Bank of Japan decided to make its yield curve control (YCC) policy more flexible at its monetary policy meeting last week.
A Bloomberg impromptu survey of 42 economists conducted on July 31 found that the next policy change was zero at the next September meeting and only 7% for the rest of the year in October and December combined. . The highest number was 27% in April 2024. A survey of 50 respondents conducted before the meeting in July found that 58% of respondents said they would see it by the end of the year, with the highest percentage in October this year at 28%.
Survey report: 90% of respondents expect BOJ to maintain policy within the year after YCC flexibility
Expectations of policy changes within the year are receding
Economists revised after YCC flexibility
Source: Bloomberg Survey
At its meeting on the 28th, the Bank of Japan decided to raise the level of continuous limit operations and increase the flexibility of the YCC policy by expanding the fluctuation limit of long-term interest rates from the previous 0.5% to 1%. Governor Kazuo Ueda reiterated at the press conference that the measures were taken in advance to deal with the upside risk of inflation, and were not measures to normalize monetary policy.
Bank of Japan makes YCC investment more flexible, raises long-term interest rate limit operation to 1%
When asked if this was a revision of the YCC that followed last December and meant the de facto termination of the YCC, 55% answered “no” and 38% answered “yes.” The median level at which long-term interest rates settle down after flexibility is 0.70%.
Nobuyasu Atago, chief economist at Ichiyoshi Securities, said that although the decision to deal with the spread of side effects in advance was a surprise, he said, “We have set the upper limit at 1%, so we won’t move for the time being. is expected.”
On the other hand, Takeshi Kataoka, chief economist at PwC Consulting, pointed out that the latest measures are just a mere shell of YCC. “Given the BOJ’s forecast that the price outlook will temporarily rise above the forecast, and the importance of completely smashing the deflationary mindset by overshooting prices, this should not have happened now,” he said. there is
Regarding the specific next move of the BOJ, 32 people (112 responses, multiple answers allowed) chose “abolition of YCC”, followed by “raising short-term interest rates” (24 people). All of them expect short-term interest rates to be raised from the current minus 0.1% after 2024, and 43% of them expect after 2025, so there is still a long way to go.
Kazuo Ueda, Governor of the Bank of Japan
Photographer: Akio Kon/Bloomberg
Yasuya Ueno, chief market economist at Mizuho Securities, said that in order to end the negative interest rate policy, it is necessary to increase the probability of achieving a sustainable and stable price target of 2%. “Even the end will indirectly be a headwind if the BOJ seeks to normalize.”
Ryutaro Kono, chief economist at BNP Paribas Securities, said that one of the purposes of the measures was to lay the groundwork for the abolition of negative interest rates. Yes, but it is highly likely that the timing will come in the not too distant future.”
Since Governor Ueda has repeatedly made dovish remarks since taking office in April, some people have taken this decision as a surprise. “Bad” was about 10%.
At a press conference, Governor Ueda said, “We are considering volatility in the foreign exchange market as well,” while minimizing volatility in financial markets through greater flexibility. Daisuke Karakama, chief market economist at Mizuho Bank, said that the BOJ should be wary of “provocations by selling the yen” going forward. It would be better to think of it as a live meeting.”
2023-07-31 21:00:00
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