The Bank of Japan Has Found Some Cover for Tapering

When a central bank feels the need to tell the world that its monetary policy is “continuous” and “powerful,” you know investors will conclude that it’s neither.Bank of Japan Governor Haruhiko Kuroda has finally created some cover for stealth tapering.The BOJ left its main stance unchanged Tuesday. It’s holding the short-term policy rate (which it charges banks to park reserves at the central bank) at minus 0.1 percent and is still targeting a 10-year government bond yield at “around zero percent.”But there are tweaks, and they’re significant because they represent Kuroda’s face-saving way out of more than five years of an unprecedented monetary experiment that gave the bank ownership of 41 percent of Japan’s government bond market and 5 percent of its stock market – far higher proportions than elsewhere.The central bank now says that “yields may move upward and downward to some extent,” effectively permitting the 10-year yield to shift beyond an unspoken 0.11 percent ceiling in place since the yield curve control program began in September 2016 – and perhaps to stay there.It’s no secret that the BOJ’s ultra-easy monetary policy has failed to instill animal spirits in Japan. Bank lending growth hasn’t accelerated, and the economy is nowhere close to generating the target inflation rate of 2 percent.As I flagged to readers last November, even… Read full this story

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