Here’s What Economists Say About the Bank of Japan’s Move

Friday’s decision by the Bank of Japan for limited policy action led to a mixed reaction among economists and analysts -- with most mentioning disappointment that Governor Haruhiko Kuroda and the BOJ board didn’t do more. Here’s their immediate reaction to the policy move:

  • Martin Schulz, a senior economist at Fujitsu Research Institute, said the timing of the government’s stimulus announcement this week made it difficult for the central bank to do something more bold.
  • “If they had done nothing, people would have speculated that they were headed toward an exit strategy; people would have assumed they were giving up on QE. And they don’t want that, for sure, but on the other hand, they don’t want to be in the corner of directly financing government debt. So they focused on private assets, not government assets. They were in a no-win situation. It was just a question of how to get out of it. Whether this was this best solution, I don’t know. ”
  • Atsushi Takeda, an economist at Itochu Corp. in Tokyo, called the action “disappointing,” and said the BOJ decided to stay away from a deeper cut to the negative rate because the strategy has been so unpopular, especially with big banks.
  • “The BOJ had no choice but to take an easing action today, especially after the Abe government has shot off the economic stimulus package. The easing menu today indicates that the BOJ has taken whatever tentative action it can take. In other words, the BOJ has avoided the easing options that it doesn’t want to do -- namely, an expansion of government bond purchases.”
  • Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities Inc. in Tokyo, called the action "unsatisfying" and said there may be further easing at the next meeting in September.
  • “The dollar operation was a surprise but the BOJ held off on increasing government bond purchases, so the BOJ’s easing today was unsatisfying. Overall, the financial markets may be disappointed with the BOJ decision. Today’s BOJ move has left a door open for further monetary easing at the next meeting.”
  • Betty Rui Wang, Northeast Asia economist for Standard Chartered Bank in Hong Kong, said she was interested in the assessment of effectiveness of BOJ policy that the board plans at its Sept. 20-21 meeting.
  • “So this is quite unusual, because since Kuroda took office, it has never indicated this kind of exact date when the BOJ will conduct the comprehensive assessment on the economy, except for those quarterly and annual economy reviews. So I think it might indicate something.”
  • Marcel Thieliant, senior Japan economist at Capital Economics, wrote in a note that policy makers may take more dramatic action in the coming review of the current policy framework.
  • "Our best guess is that policy makers may then explore more radical measures, for example purchases of municipal bonds or providing loans to banks at negative interest rates.” Thieliant also said, regarding the BOJ’s increase in ETF purchases to 6 trillion yen a year, that “since it kept its target for purchases of Japanese government bonds unchanged at 80 trillion yen, this implies that it will have to sell other assets, e.g. Treasury bills, in order to prevent the monetary base from rising too fast.”
  • Takeshi Minami, chief economist at Norinchukin Research Institute, said in his view the BOJ “succumbed to political pressure” to do something, partly as a result of the government’s announcement Wednesday of its stimulus package, yet it couldn’t act on the negative rate because it’s unpopular.
  • “The BOJ is already doing what it can. Even if they double the ETF buying, it won’t make the 2 percent inflation goal happen sooner. The BOJ was used politically this time while it’s doing its part. People have this idea that Kuroda’s BOJ will do a bazooka when it eases. But this time the market and the government pushed the BOJ into the corner.”
  • Kohei Iwahara, economist at Natixis in Tokyo, said he thought the BOJ would take no action and said this limited action could indicate the BOJ is running out of policy tools.
  • “The decision was rather half-way, wishy-washy because it was far below market expectations, which had gone through the roof. The market could interpret today’s decision as the Bank of Japan lacking policy tools. Probably they wanted to appease the government and make the government happy. There were also some kind of policy easing expectations from the government. For me it is not a good decision. It is kind of depleting their ammunition by easing today.”
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