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Bloomberg
The Bank of Japan (BOJ) in the coming week is widely expected to stick with the negative interest rates that set it apart from the world’s other major central banks.
At the decision due on
Tuesday, Governor Haruhiko Kuroda will reiterate his out-of-sync stance that monetary stimulus must stay in place to secure lasting inflation.
That’s in contrast to the hawkish language on prices and interest rates that dominated the global central banking landscape over the past week, even as the Federal Reserve, the European Central Bank and the Bank of England opted for smaller hikes than before.
All 47 economists surveyed by Bloomberg forecast no change in the BOJ’s policy settings, including its 0.25% cap on 10-year bond yields.
After a decade of trying to generate inflation in an economy known for its entrenched price weakness, Kuroda is determined to keep stimulus on tap in the remaining months of his tenure.
Inflation in Japan is at a four-decade high, but more subdued than in the US and Europe. Figures due are expected to show core inflation inching up towards 4%, but Kuroda is waiting for signs of wage growth to reinforce a price trend he says is still driven by higher commodity prices and a weak yen.
Speculation among investors and BOJ watchers is therefore focusing on the policy trajectory after Kuroda steps down in April.
BOJ officials see the possibility of a policy review in 2023 after examining wage growth momentum and the extent of a global slowdown, people familiar with the matter said earlier this month. Reviews in the past have resulted in
adjustments, including the switch to yield curve control.
Until then, the world’s last anchor of low interest rates is set to remain in place.
“With a stand-pat decision on key levers, investors will watch for any indications from Kuroda on whether or when the BOJ will conduct a policy review,†said Yuki Masujima, senior economist
Elsewhere, the economic calendar is thinning out as the year winds down and the Christmas holidays loom.