Barclays says the BOJ has little room to alter monetary policy in 'either direction'

Author: Eamonn Sheridan | Category: Central Banks

The Bank of Japan December monetary policy meeting concluded yesterday with an unchanged decision  

Bank of Japan Governor Kuroda followed up with a news conference:
Barclays have their assessment up now ,,,, this in brief, bolding mine:

The BoJ, as widely expected, voted to maintain its current monetary policy stance at today's monetary policy meeting.
  • The sharp disparity between the robust economy and sluggish prices (flattening in Phillips curve) leaves scant room for an adjustment in monetary policy in either direction
Policy board member Goushi Kataoka, a keen QE advocate, dissented as in the previous meeting on the grounds that the present easing is insufficient to achieve the bank's inflation target.
  • However, he did not put forward an official proposal, and his arguments conversely only served to highlight the limitations of monetary easing
We believe the BoJ will maintain its monetary easing via QQE+YCC in 1H 2018 on continued stagnation in CPI inflation.
  • Subsequently, we anticipate mounting speculation of a revision in YCC in 2H
The BoJ will face numerous challenges in its monetary policy and operations as it moves to adjust YCC and normalize policy, including a redefinition of its inflation target and balance sheet adjustments

The hunt for a new BoJ governor and two deputy governors will begin in earnest at the start of the new year.
  • If Haruhiko Kuroda is reappointed governor, as per our forecast and the market consensus, the makeup of the policy board should remain neutral as at present.
  • The choice of another candidate could shift the composition either in the direction of an early normalization of policy or a prolongation or enhancement of monetary easing.