Economists’ Takeaways From the BOJ Policy Decision and Review

Here is a selection of comments from economists on the Bank of Japan’s policy decision and comprehensive review released on Wednesday:

For a full account of the policy action from the BOJ, click here

Yuichi Kodama, Meiji Yasuda Life Insurance Co.:

"The move basically means the BOJ has shifted its main policy target to the yield curve from the monetary base. If it takes additional easing in the future, it will probably deepen the negative rate."

"Today’s decision means the BOJ has admitted that the current policy scheme of government bond purchases is close to its limit."

Takeshi Minami, Norinchukin Research Institute:

“The next move is to make a deeper cut in negative rates. That’s needed to steepen the yield curve. They will make a move after market participants have had enough time to digest today’s changes.”

Marcel Thieliant, Capital Economics:

"It makes little practical difference if you pledge to overshoot inflation when everyone is concerned that inflation is well below the target and falling. So pledging to overshoot doesn’t really have a big impact. It could imply that they will keep rates lower for longer."

"One aim is to prolong the QQE and to taper in the future. It makes sense to focus on the yields rather than the quantity, and now they have scrapped the quantity target so they can taper the purchases without having to explicitly lower the target. The policy then serves practical and messaging purposes."

Takuji Okubo, Japan Macro Advisors:

"The BOJ can control the long-term interest rate. The problem is that the JGB market will be rigged. It is not a market price -- it is a fixed price."

"It does help the current banking industry but I would say the Japanese banking system is outdated. They need to restructure. The reason they are unprofitable is because they are outdated. By helping an inefficient industry I don’t think the Bank of Japan is helping the economy."

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