BOJ Keep Mum On Stimulus Exit Strategy

Japan’s success in rekindling inflation is raising the stakes for policy makers to map out the endgame for monetary stimulus, given the risk of a surge in yields when the Bank of Japan winds down bond purchases.

With the BOJ’s benchmark inflation gauge past halfway to Governor Haruhiko Kuroda’s 2 percent target, yields on 10-year government securities are still the world’s lowest at 0.67 percent — held down by central bank purchases of unprecedented scale. Even so, Kuroda, who meets with fellow board members next week, says it’s “too early” to discuss an exit strategy.

In the absence of the BOJ, investor demand for compensation from inflation could send the government’s borrowing costs surging, fueling the danger of a collapse in confidence in the fiscal sustainability of the world’s third-largest economy. Kuroda should start thinking about “disengaging” now, according to economist Richard Koo.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu