In the face of the struggling domestic economy, the Bank of Japan’s decision this week not to provide additional stimulus measures, the market was shocked, prompting some investors and traders bet the central bank policy makers have to make do tricks for further yen gains open.
Haruhiko Kuroda, president of the Bank of Japan on Thursday to expand the market for loose crushed expectations, the yen after the resolution came out ferocious rally, rose 2.6% to 108.11 against the dollar one day, the highest in five years the largest single-day rise, and come Friday 18-month high of 107.075. Strong yen makes Japanese exporters hit Japanese stocks Nikkei .N225 weekly fell 5%.
Anti-Japanese force in the Battle of deflation, Kuroda has been on the front lines, the introduction of large-scale asset purchase plan, and decided to implement negative interest rates earlier this year.
For central banks from the world’s most daring increasingly radical non-traditional stimulus, financial markets addicted to them. The Kuroda temporarily on hold, even if only to assess the effectiveness of past easing policy, but also to the market sounding the alarm.
“Here we can not help but think that perhaps we are witnessing the end of the experiment the greatest monetary easing, and obvious, which the Bank of Japan is a very dangerous road,” Frederic Neumann, co-head of Asian economic research at HSBC in Hong Kong (Frederic Neumann ) said.
“So the Bank of Japan to take further action to pressure only bigger,” he said, adding, “If there is no further action, the yen is likely to continue its upward trajectory, the stock market will remain under pressure.”
Kuroda Thursday to launch more stimulus is indeed open the door, called to deal with a strong emphasize the risks facing the economic outlook, what kind of monetary policy and unrestricted.
“We are committed to achieving the inflation target of 2% as soon as the position of absolutely no change, and to achieve the target at all costs,” Kuroda said, “If necessary, we may also further push down negative interest rates.”
Thursday, the Bank of Japan has lowered its quarterly inflation expectations, and the price will reach the target of 2% of the time to push again after six months, you may want to say at the latest in March 2018 in order to achieve their goals.
The yen surged trend, and in March the European Central Bank president Mario Draghi said there was no need to cut interest rates further after the euro’s performance is similar.
Even though the European Central Bank to expand the asset purchase program, but the market will continue to push the euro higher that day nearly 2%, but since then the euro has been rising.
ECB executive committee and chief economist at Nelspruit on Friday just said that only a serious deterioration in the inflation outlook, the ECB will cut interest rates again.
US Federal Reserve Board (Fed / FED) has begun to close the faucet of global economic recapitalization, not introduce new quantitative easing and raise interest rates at the end of last year.
** Global stimulus ends? **
“We have now found that, although inflation remained weak and the strong local currency, the European Central Bank and the Bank of Japan are somewhat reluctant to implement further easing,” ANZ Bank (ANZ / ANZ), said senior analyst David Cannington.
“Whether this is such an important and unprecedented global monetary easing action near the end of a sign?” He asked.
He said, If so, then some of these policies cause distortion, especially distortion in exchange rates may decline.
But others believe, to see the effect of policy easing takes time, usually takes a few months, central banks do anything in order to assess the effects of policies, it makes sense.
Some people say they want to guess Kuroda has launched deterrent action, and that action is indeed possible to make the Japanese public to get rid of the idea of deflation. This means that until the right time to release the big move, rather than piecemeal action.
“Just in the market due to the Bank of Japan left out and feel depressed occasion, there is a more ambitious perspective view, the Bank of Japan to relax the policy only postpone, rather than not relax,” said Mizuho analyst.
They believe that Kuroda in preparation of the big move when the shot, then a bold move will slow down because of inflation and continued weak industrial and export more reason to launch.
“If this is the case, then the transaction for the Bank of Japan trends – short to do more yen and Japanese stocks, it may be rewarding this summer.”