Lessons From Past Haunt BOJ As Yield Rise Sparks Talk Of Tightening

One America News Network | 11/1/2016 | Staff
Les7799 (Posted by) Level 3
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TOKYO (Reuters) – For the first time in a decade the Bank of Japan is prepared to contemplate the possibility of a future rate rise – a radical shift for an extremely dovish central bank that now finds itself boxed into a corner by surging global bond yields.

But that doesn’t mean the BOJ is anywhere close to pulling the trigger.

Governor - Haruhiko - Kuroda - Deputy - Governors

Not only Governor Haruhiko Kuroda and one of his deputy governors Kikuo Iwata – widely regarded as the architects of the BOJ’s massive money-printing experiment, but many others on the nine-member board would need a significant change of heart.

And central bank officials haunted by their two failures since 2000 to exit zero rates would rather be late in tightening than be caught out, and criticised, again for taking the steam out of the economy.

Thing - BOJ - Recovery - Growth - Source

“The last thing the BOJ wants is to be blamed for ruining a budding economic recovery and to be criticised yet again for doing too little to spur growth,” said a source familiar with the BOJ’s thinking.

Under a new policy adopted in September, the BOJ shifted its policy target to interest rates from the pace of money printing in the hope doing so would relieve it from maintaining its huge government bond-buying that many analysts see as unsustainable.

BOJ - Pledge - Bond - Yields - Bond-buying

The BOJ believed it could achieve its new pledge of guiding 10-year bond yields around zero with less bond-buying. But containing yields have proven more difficult than expected, as Japanese government bond (JGB) yields rose in tandem with soaring global rates on bets the incoming U.S. administration led by Donald Trump will boost fiscal spending, growth and interest rates.

After holding policy steady on Tuesday, Kuroda shrugged off talk of a rate hike, saying maintaining the massive quantitative and qualitative easing (QQE) stimulus remained the priority while inflation was under 2 percent.


(Excerpt) Read more at: One America News Network
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