“The second half of next year [the] The likely time for the BOJ to end its negative interest rate policy,” said Takahide Kiuchi, a former BOJ board member (pictured, 2017).
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The Bank of Japan may delay any adjustments to its monetary policy given the turmoil in financial markets caused by the Silicon Valley banking crisis, a former board member told CNBC.
Economists at Nomura Research Institute said any change in its ultra-dovish stance could be delayed by as much as a year Kiuchi TakahideServed on the Policy Committee of the Bank of Japan from 2012 to 2017.
Kiuchi had previously expected incoming Governor Kazuo Ueda to accelerate the BOJ’s monetary policy normalization — including expanding the current yield curve control policy to keep Japanese government Negative interest rates have been maintained for years.
This is no longer the case.
“I think the new governor’s monetary policy could be influenced by financial market conditions if the current instability in financial markets continues,” Kiuchi told CNBC in an interview.
“The second half of next year [the] The likely timing for the Bank of Japan to end its negative interest rate policy,” he said.
Outgoing Bank of Japan Governor Haruhiko Kuroda final meeting Earlier this month, it kept interest rates at -0.1% and stuck to the central bank’s 2% inflation target and plans to keep government bond yields around 0%.
Kiuchi stressed that the Fed’s next move will remain an “important factor” in the BOJ’s path forward.
“If the U.S. economy slows sharply, leading the Fed board to cut rates, the BOJ’s normalization process may have to be delayed significantly,” Kiuchi said.
Kiuchi still expects the BOJ to widen the tolerance band on its yield curve this year — he expects to widen the range from 50 basis points to 75 or 100 basis points as early as June.
“JGBs are very low right now … if these conditions persist, I think the BOJ may expand the cap,” he said.
Public sentiment is also an important indicator for the BOJ, Kiuchi said – adding that the central bank will ultimately aim for “flexibility” in monetary policy.
“I think this rigidity led to a sharp devaluation of the yen last year, which was very unpopular with the public,” he said.
“that’s why [Prime Minister Fumio Kishida’s] Government wants more flexibility under new policy [BOJ] Governor,” he said.
Yen weakens past 150 to USD In October, the spread between the Fed’s hawkish stance and the Bank of Japan’s negative interest rates widened.
The board of directors of the central bank expressed dissenting opinions on the current policy, minute from its January policy meeting showed.
According to the minutes, one member “expressed recognition that continued accommodative monetary policy is appropriate for the time being, notwithstanding the need to examine and assess the balance between positive effects and side effects at some point in the future”.
However, another member said that “it would be inappropriate to hastily withdraw from the current monetary policy as overseas economies are currently headed for a slowdown.”