Bank of Japan (BoJ) Deputy Governor Masazumi Wakatabe is back on the wires this Thursday, noting that the “BoJ’s Dec decision to widen band was a necessary step to make YCC more sustainable, but the move alone may have had the effect of weakening stimulus effect.”
Additional comments
It is taking some time for market function to improve.
Even with Dec step, stimulus effect is sufficient because inflation expectation is heightening.
Must strike balance to avoid weakening effect of stimulus, when asked whether boj should widen yield band again.
BoJ’s ultra-loose policy has had effect in pushing up inflation expectations.
We are seeing signs inflation may be heading toward hitting 2% inflation in sustainable manner, but not yet convinced this will actually happen.
Must look not just at short-term, but medium, long-term inflation expectations.
BoJ must not be complacent as downward price pressure remains fairly strong.
Market reaction
USD/JPY was last seen trading at 128.54, down 0.26% on the day, courtesy of the dovish Federal Reserve policy outlook.