- BOJ should finally leave YCC and move to a zero rate policy – mom
- Wages, economic strength key to BOJ ending current policies
- US recession risk may deter BOJ from action next year
TOKYO, Nov 24 (Reuters) – Rising risks of a global economic recession will prevent the Bank of Japan (BOJ) from ending its stimulus program until at least 2024, former BOJ director Kazuo Momma told Reuters on Thursday. .
With interest rates raised by central banks around the world to counter rising inflation, markets are abuzz with speculation. The BOJ will also adjust the yield curve control (YCC) and long-term interest rates when lenient Governor Haruhiko Kuroda’s term expires. Will interest rates continue to rise. In April next year.
Given the rising cost of long-term easing, the BOJ should eventually abandon the YCC, which combines a negative short-term interest rate target with a zero interest rate ceiling on 10-year bond yields, and revert to a policy that leads to short-term easing. term rates. Zero, said the mother.
But the BOJ could hold off on taking such steps next year, as the rising prospects of recession in the US depend on Japan’s export-dependent economy, he said.
“The BOJ’s next biggest challenge is to eliminate YCC and negative interest rates and move to a zero interest rate policy,” the MoMA said.
“It’s difficult to do that next year as the Japanese economy faces headwinds from slowing global growth,” Mamma said. “This is more likely to happen in 2024, when the economy recovers and there is more clarity about whether wages will continue to rise,” he said in an interview.
Prolonged ultra-low interest rates have hurt the profits of financial institutions, while the BOJ’s relentless purchase of bonds to protect the interest rate limit has distorted the shape of the yield curve.
Mamma said BOJ policymakers would pay more attention to such side effects and lay the groundwork for an eventual move away from YCC.
He said that in ending the YCC, the BOJ would give no advance signals, but would minimize any disruption to the market from the announcement by offering to flexibly buy bonds until yields stabilize.
Mamma said the BOJ will also clarify that the end of the YCC will not be the start of outright monetary tightening, but a gradual transition to a more “normal” form of monetary easing.
The timing of such policy adjustments would depend largely on wage prospects and the strength of the economy, he added.
“It is very important that Japan sees a positive cycle in which higher wages drive up inflation. Without it, it is difficult for the BOJ to move out of the current policy,” said Mamma, who currently works at private think tank Mizuho Research & Technologies. executive economist. ,
Reporting by Leika Kihara and Takahiko Wada; Edited by Robert Birsel
Our Standards: The Thomson Reuters Principles of Trust.