There is increased speculation that BoJ governor Kuroda and his Monetary Policy Committee will start hinting at a possible exit strategy from their Qualitative and Quantitative Easing (QQE) Policy, which combines asset purchases with a zero percent target on 10Y Japanese Government Bonds (JGBS) and negative rates (-0.1%) on excess reserves on bank deposits held with the Bank of Japan, according to analysts at ING.
Key Quotes
“Although there is such merit in this speculation, given the duration and extent of improvements in economic growth, and recent inflation data has been more positive, much of the inflation pick-up is related to energy prices, and as such, almost certainly only a temporary response to crude oil fluctuations. So we don’t think the time is yet right for the BoJ to signal an end to the easing.”
“If we are wrong and they decide to do so, we believe the most sensible course of action would be to simply formalise the undershoot of current asset purchases in a new target. This would send a moderate signal of policy re-alignment, whilst actually changing nothing on the ground. It could therefore be viewed as a dovish normalisation.”
“The other factor to bear in mind is the approach of the April 2019 consumption tax hike. With data running as well as it has, this tax hike has to remain on the cards. If the BoJ waits too long to start moving on its exit plan, it may find its attempt to extricate itself from unnecessary easing clashing with the fluctuations caused by the tax hike.”
“In short, the arguments for some normalising BoJ action are growing, but the story is not there yet. That said, the window for moving will not be wide open forever, and a move later this year, perhaps at the start of the next fiscal year, might be a sensible base forecast.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Recovery needs a stronger catalyst
Despite the US Dollar’s firm performance, AUD/USD managed to shake off four consecutive daily declines and retest the 0.6300 barrier, buoyed by widespread risk-on sentiment fuelled by Trump’s tariff headlines.
EUR/USD does not rule out extra declines
EUR/USD traded on the defensive in response to the continuation of the buying interest around the Greenback, dropping to three-week lows in the sub-1.0800 region.
Gold nears $3,000 amid tariffs’ optimism
The intense march north in the Greenback, in combination with the marked rebound in US yields across the curve are prompting Gold prices to recede to the proximity of the critical $3,000 mark per troy ounce.
Crypto Today: Trump’s tariff updates sparks Bitcoin rally, as AVAX, SOL, Chainlink lead altcoin gains
The US Fed decision to maintain rates unchanged last week ignited risk-on appetite across global risk assets markets. This saw demand for the US weaken 4% from its January peaks, according to Bloomberg.
Seven Fundamentals for the Week: Tariff news, fresh surveys, the Fed's preferred inflation gauge are eyed Premium
Reports and rumors ahead of Trump’s reciprocal tariffs announcement next week will continue moving markets. Business and consumer surveys will try to gauge where the US economy is heading. Core PCE, the Fed's preferred inflation gauge, is eyed late in the week.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.