It seems that Ueda is trying to be a “hedger” to prevent any disruptive movement in the global financial markets that increased cross-assets volatility significantly given that there are several potential risk-off shocks such as the ongoing US debt ceiling partisan squabbles that may lead to failure to extend the debt ceiling this summer’s deadline.
The key point to note is that prior “everlasting” forward guidance of keeping BoJ’s key interest rate at a negative level has been scrapped coupled with projections upgrade on Japan’s inflation (core and core-core) for both FY 2023 and FY 2024 which suggests that Ueda may be laying down the groundwork via baby steps for monetary policy normalization.
Perhaps, a change may come after summer when the US debt ceiling fiasco may be resolved and waiting for more clarity for a pause on the Fed’s current interest rate hiking cycle.
What do you think about Friday's BoJ and the monetary policy review horizon?
Hello, hope all is good on your end.
It seems that Ueda is trying to be a “hedger” to prevent any disruptive movement in the global financial markets that increased cross-assets volatility significantly given that there are several potential risk-off shocks such as the ongoing US debt ceiling partisan squabbles that may lead to failure to extend the debt ceiling this summer’s deadline.
The key point to note is that prior “everlasting” forward guidance of keeping BoJ’s key interest rate at a negative level has been scrapped coupled with projections upgrade on Japan’s inflation (core and core-core) for both FY 2023 and FY 2024 which suggests that Ueda may be laying down the groundwork via baby steps for monetary policy normalization.
Perhaps, a change may come after summer when the US debt ceiling fiasco may be resolved and waiting for more clarity for a pause on the Fed’s current interest rate hiking cycle.
SNB "normalized" policy last summer and created expectations for BoJ move.
BoJ disappointed the markets and intervened only when everyone was looking at 200 USDJPY.
Seems a similar dynamics is at play now and, as you point out, they do realize the potential impact on host of other assets.