“We maintain our baseline scenario that the BOJ will deliver two more 25-basis-point increases this year — in April and July — taking its target rate up to 1.0%, the lower end of estimates of Japan’s neutral rate.”— Taro Kimura, economistFor the full report, click here
During his post-decision briefing Ueda said there was no set course for rates and he played down the significance of Himino’s comments, in a possible sign he will refrain from hinting so heavily going forward. He read from a prepared note and tried to imply that the remarks merely spelled out the obvious process of each policy decision.
“Through Deputy Governor Himino’s speech in January we tried to give a reminder of our basic stance that at each policy meeting we properly look at the data available, and debate whether it’s appropriate to change monetary policy,” Ueda said.
Communication was one of the first few things Ueda pledged to work hard on when the news broke that he was going to be nominated as BOJ governor in February 2023. As an academic, it’s vital to explain in a way that’s easy to understand, he told reporters then.
After a remarkably smooth policy transition in his first year, the fallout from the July rate hike demonstrated the difficulty of achieving that intention on a regular basis. But making each decision too obvious risks placing too much attention on individual hints from the governor and his deputies and depriving markets of a chance to position for alternative outcomes.
“Too much signaling by the BOJ is not good as the market will not function properly,” said Ayako Fujita, chief Japan economist at JPMorgan Securities. “Markets are only viable when there are divergent views.”
