‘BOJ to take time before next steps made’

Bloomberg

Bank of Japan watchers can rest easy and enjoy a late summer holiday because it won’t be making another policy tweak any time soon, according to a former BOJ official.
“It will take time for the BOJ’s next policy step given the need for a consensus from the nine board members,” said Takashi Kozu, who held a wide-range of positions at the central bank and was a member of the Basel Committee on Banking Supervision from 2006 to 2010.
“The BOJ has reached a limit to the ambiguous rhetoric used in July, which can’t be repeated anymore. The next move will have to be explained based on fundamentals.”
That will prove to be challenging, Kozu, who is now president of the Ricoh Institute of Sustainability and Business in Tokyo, said.
He sees the domestic and global economy turning a corner and entering a phase of lower growth in the near future.
The BOJ’s policy adjustments in July were the first in two years to its massive monetary stimulus programme, setting it up for the longer haul while taking steps to reduce side effects. Inflation remains less than half way to its goal after more than five years of extraordinary stimulus. Japan’s economy grew at a faster pace than first estimated in the second quarter, according to data.
“What most worries the BOJ now may be whether it can survive the next cyclical trend without doing anything additional, when Japan faces the need to adopt economic policies to strengthen growth next year,” he said.
“There is a risk the BOJ is left with no policy options.”
Efforts to steer monetary
policy towards normalisation will stall as reliance on external demand makes the economy vulnerable to a global downturn, he said. Fear of yen appreciation will also prove a hurdle, he added.