(Bloomberg) -- Bank of Japan Governor Kazuo Ueda cemented his credentials as the country’s great normalizer by doubling down on efforts to drag the central...
-- Bank of Japan Governor Kazuo Ueda cemented his credentials as the country’s great normalizer by doubling down on efforts to drag the central bank away from the experimental fringes of global policymaking toward a more orthodox stance.The BOJ chief and his board Wednesday raised rates for the second time this year and unveiled plans to slash in half its bond purchases after a debt-buying binge of more than a decade.The new interest rate of 0.
The events kept the dollar sliding against the yen Thursday. It slipped below 149 for the first time in more than four months, while the Nikkei 225 stock index tumbled in the morning session.Bhimavarapu expects Japan’s rates to peak at 1% next year alongside improvements in consumption and the growth prospects for the economy.“Until now, we had assumed it was a relatively safe bet that the BOJ would enter an extended pause after increasing rates by 25 bps to 0.5% in October.
“The question is whether the economy and inflation will really come along with what the BOJ is expecting as they become increasingly forward looking on policy. Service prices still aren’t that strong yet,” he said. The cost-of-living crunch generated by Japan’s inflation and its feeble yen are keeping Kishida’s approval ratings on the floor ahead of a key leadership election in September.
The recent strengthening in the yen ahead of Wednesday’s BOJ and Fed meetings arguably gave Ueda the cover he needed to raise rates without giving the impression there was any connection with the currency. “After almost 30 years of de-facto zero interest rates and unprecedented financial socialism—the BOJ owns approximately 50% of government debt and almost 10% of the TOPIX stock market,” he said. “Capitalism is coming to Japan.”
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