​​​​​​​BoJ still a long way off its 2% target  - Commerzbank

According to Bernd Weidensteiner, analyst at Commerzbank, BoJ will sit tight at its meeting tomorrow. He noted that the BoJ is still a long way off its 2% target and therefore it could push back its expected timing for achieving its target – Q1 2018 up to now – once again, in its updated projections that will be published after the meeting.

Key Quotes

“Governor Kuroda has indicated before a parliamentary committee that the Bank of Japan will sit tight next meeting and not decide on any new measures. It has after all only just altered its strategy at the last meeting with its introduction of a ‘Yield Curve Control’.”

“The BoJ wants to keep the yields of ten-year Japanese government bonds close to 0%. This has not been difficult so far; the ten-year yield is currently at around -5 bps. Kuroda has stressed with regard to yields of very long-term bonds that a further flattening of the yield curve is not desired.”

“His deputy Iwata does not see any necessity to control yields of bonds with a maturity of over ten years as these had less effect on the economy in his view than “shorter” yields. This clarification is to be seen as a reaction to complaints by the financial sector, which sees its stability at risk when long maturities have very low yields.”

“The BoJ had subsequently added a statement in its communiqué that it would take account of the overall financial conditions in its policy. The side-effects of negative interest policy are clearly heavier than initially assumed. Despite all its efforts, the BoJ is still a long way off its 2% target. In its updated projections that will be published after the meeting, it could therefore push back its expected timing for achieving its target – Q1 2018 up to now – once again.”