The BoJ will without doubt, be discussing a possible response to recent volatility in the financial markets. The target for expansion of the monetary base is expected to be maintained at 60-70 trillion JPY annually, but it is possible that the eligible maturity of BoJ's fixed rate operation could be increased to two years from the current one year, to anchor the short end of the yield-curve.
While the BoJ maintains its target for expansion in the monetary base, there is flexibility within the annual target. Attempts to reduce volatility in financial markets will probably tend to frontload the targeted increase in the monetary base. For that reason it should be regarded as monetary easing.
Markets will probably respond with disappointment if the BoJ does not announce measures to stabilize financial markets. However, in our view, the case for attempting to stabilize financial markets at the current juncture is fundamentally weak. The economy is moving in the right direction, and so far the increase in bond yields and drop in the stock market is not a major threat for recovery. Communication of conflicting targets from the BoJ has probably added to volatility in the bond market.
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Kuroda's Difficulties To Resist Market Pressure
Published 06/09/2013, 08:33 AM
Updated 05/14/2017, 06:45 AM
Kuroda's Difficulties To Resist Market Pressure
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