BoJ Rolling Back From Its Beloved Policy?
Bank of Japan’s deputy governor Masayoshi Amamiya is planning to quit the ultra-loose monetary policy. According the the source, the deputy governor "tries to create something new". Someone even told that BoJ considered 2 rate hikes this year. But, subdued inflation interfered with those ideas.
Last week, BoJ ended parts of its policies that have harmed banks, paralyzed Japan's bond market and distorted stock prices. A person, familiar with the matter noted: "The latest steps marked a major turning point for Kuroda's stimulus program," and "The reflationists have become a minority, which means the BOJ is turning more hawkish."
But, it is hard to say whether the change is really coming. A former BOJ policymaker said: "Unwinding monetary support is far more difficult than expanding it".
Last week, after BoJ hinted on the asset buying program reduction, by saying it would purchase "flexibly", and negative rates will be applied to a smaller pool of reserves, Japanese yen weakened and bond yields rose to a 1-1/2 year maximum. One source claimed: "It's unclear what the BOJ really wants to do. It's doubtful how much the latest moves would help banks. The only thing clear is that with a dearth of policy tools, the BOJ is in a deadlock."