Haruhiko Kuroda, governor of the Bank of Japan (BOJ), once again confuses the market. After the central bank decided not to do anything, Kuroda said at a press conference on Wednesday (18th) that “monetary policy will continue to be loosened to achieve sustainable and stable inflation.” .
Just last month, when the market believed that the Bank of Japan would not take any action, the central bank unexpectedly raised the target range of allowable bond yield fluctuations. At this month’s meeting, when investors believed that the central bank might reveal the direction of policy changes, Once again, Kuroda let the market guess wrong.
Previously, the market bet in the wrong direction, resulting in the announcement of the central bank’s decision, the yen exchange rate fell sharply, falling 2.6% against the US dollar to 131.48 at one point. Japanese government bond futures rose sharply after reopening in the afternoon. The yield on the 10-year Japanese government bond fell 10.5 basis points to 0.395% in the afternoon, and the 20-year yield fell 9.5 basis points to 1.27%.
Kuroda further released dovish remarks. He said that there is no need to expand the range of yield targets at present, and the time since the previous adjustment is not long. It may take some time for these measures to start to play a role in repairing market functions. Therefore, yield curve control (YCC) is fully sustainable.
Kuroda pointed out that what is important now is to support the economy and encourage companies to raise wages, while not ruling out the possibility of negative interest rates being used to finance businesses.
Regarding the monetary policy stance, Kuroda repeated the old tune, saying that he would continue to maintain loose policy until a sustainable price target is achieved, and would not hesitate to further relax if necessary.
Regarding inflation, Kuroda believes that it is not yet at the stage of sustainable growth. Core CPI is currently around 3%, but is expected to fall below 2% in the next fiscal year.
Regarding the future economic situation, Haruhiko Kuroda said that the Japanese economy is picking up and is in the recovery period of the new crown epidemic. Market health will improve, the output gap may soon recover and corporate profits are at record levels, but uncertainty over Japan’s economy remains high.
After Kuroda made his statement, Yentian rose above 131.0, still up 2.3% within the day.
