The Magical Land of Low Inflation and No Rate Hikes
The BOJ chief’s categorical refusal to raise the cost of borrowing may seem stark. But it reminds us that there are some key outliers to the global trend.
Here’s to you, Mr. Governor.
Photographer: Jun Hirata/Kyodo NewsBonds are sliding and forecasts for U.S. interest rate increases are escalating rapidly. Borrowing costs have moved up in the U.K., South Korea, New Zealand and a swathe of emerging markets. There are outliers, however. Among them, Asia’s two most powerful economies: China, which cut a key rate this week, and Japan, a country that's battled deflation for a generation and where a top official was unusually defiant in the face of rate hikes.
Even by the standards of enhanced transparency and forward guidance of past decades, Bank of Japan Governor Haruhiko Kuroda's remarks were extremely direct: “Raising rates is unthinkable,” he told reporters Tuesday after the BOJ's policy meeting. A hike in borrowing costs anytime soon was always considered unlikely. Inflation has been below the central bank's 2% target for years. The slight mark-ups in the bank's projections this week still wouldn’t put prices within striking distance of the long-elusive goal in the foreseeable future.