Technical Analysis

BOJ December meeting Summary of Opinions: Must maintain easy policy


Eamonn Sheridan

From the Bank of Japan:

Summary of Opinions at the Monetary Policy Meeting on December 19 and 20, 2022

Full text is here

Headlines via Reuters

  • BOJ must maintain YCC until needed to stably, sustainably hit price goal
  • BOJ must maintain easy policy as Japan in critical phase in hitting price goal
  • Japan showing signs of wage rises, positive economic cycle but appropriate to maintain easy policy for time being
  • Bond market function worsening which, if continued, would disrupt positive effect of BOJ’s easy policy
  • Corporate bond spread widening as bond market function deteriorates, sour investors’ sentiment
  • Appropriate to widen BOJ’s yield band due to concern over negative impact on bond market from YCC
  • Widening of yield band is not shift from loose monetary policy, aimed at making current stimulus more sustainable
  • BOJ must widen trade band to address declining market functions but
    even so, no change to fact powerful monetary easing continues
  • BOJ must widen yield
    band to address distortion in 10-year JGB pricing but this is not a
    step toward exit from ultra-easy policy
  • by pledging to
    flexibly buy bonds, BOJ would enhance sustainability of its monetary
    easing

Countering the ill-effects impacting the bond market were a prime reason cited by the BOJ when they widened the band. Repeated above.

Also repeated are:

  • need wage growth
  • widening made easy policy more sustainable
  • the widening is not a step toward exiting easy policy

More points from the Summary:

  • BOJ must humbly scrutinise how much widening of yield band would
    improve market function
  • When BOJ eyes exit
    from easy policy, it must check to see whether market players are
    prepared for such move, where risks could lie when interest rates
    rise
  • Appropriate to
    maintain easy policy now but at some point, BOJ must conduct
    examination of its policy to gauge balance of pros and cons of
    current measures
  • Tweaking BOJ’s
    price target would be inappropriate as it would dilute its policy
    goal and make its monetary policy effect insufficient
  • Govt rep said
    understand today’s debated step is aimed at conducting more
    sustainable monetary easing
  • Govt rep said hope
    BOJ continues to work closely with govt, guide policy appropriately
    with eye on economic, price, financial developments
  • Inflationary
    momentum may be increasing in japan as prices rising not just for
    goods but services
  • Consumer price
    conditions approaching conditions seen before japan slid into
    deflation
  • There is still some
    distance toward sustainably, stably hitting price target
  • Year-on-year rise in
    import prices clearly narrowed in November as commodity prices
    falling from peak levels
  • There is good chance
    wages will rise significantly due to robust corporate profits
  • More firms becoming
    keen on raising wages as job market tightens, which could help push
    up inflation sustainably

Background to this release is here:

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