Bank Of Japan "Quietly Turning Eagle"

No matter how many times the Fed has increased interest rates, the Bank of Japan still maintains a negative interest rate and becomes the world's most unwavering quantitative easing path.

The differences between doves and hawks in the central bank have almost never diminished.

But after Friday's interest conference, things seemed to have undergone some subtle changes.

In the first quarter of the economic and price outlook released by the Bank of Japan, the inflation forecast in fiscal year 2020 dropped from 1.5% to 1.4%, while inflation expectations in fiscal year 2021 were only 1.6%, even the most optimistic members of the monetary committee were only 1.7% of expected.

This means that 2% inflation targets will not be achieved in the next three years.

However, there is a suspected hawkish shift in the monetary policy guidelines of the Monetary Commission.

In the economic and price outlook, when it comes to monetary policy prospects, the Bank of Japan says it intends to continue to maintain "ultra-low level short-term interest rates and long-term interest rates for a period of time, at least until the spring of 2020," and the previous guidelines did not specify the time of spring 2020.

This means that the Bank of Japan may have to reconsider the policy interest rate when inflation has not reached the target of 2%.

This tone is more hawkish than the market expected.

Kuroda Higashihiko, President of the Bank of Japan, also said at the conference that the change in the wording of the forward-looking guidelines stressed that the Bank of Japan would not reconsider the policy interest rate immediately after the rise of the consumption tax.

And at least "low" interest rate "at least" until the spring of 2020, this "at least" may also be quite a long time.

The rate of debt purchase has also slowed down significantly.

At present, the rate of expansion of the BoJ's balance sheet has dropped to 1/3 of the level of 2015-2016 years.

Bloomberg quoted the chief economist of Credit Suisse, Japan's chief economist, as saying that the unexpected hawkish position is that the BoJ does not intend to make more easing. It also shows that the normalization of monetary policy is still one of the options on the table.

Another point is that in October this year, Japan's consumption tax will rise from 8% to 10%.

Judging from the current situation, if the excise tax has dragged down the economy, the BoJ may not have resorted to massive easing policies to stimulate the economy as it did five years ago.

The last increase in consumption tax was in 2014, and the increase was two percentage points.

The Bank of Japan then dramatically expanded the scale of its purchases.

Today, when the Bank of Japan almost gave up its inflation target, it is not possible to reproduce the stimulus of that year.

Japan's current economy is more affected by external factors, and the additional stimulus is not expected to achieve much better results.

On the other hand, the toolbox of the bank has also bottomed out. The financial times has quoted Morgan Masamichi, a Japanese economist from J.P. chase, as saying that the Bank of Japan has not expanded the urgency of easing now: "their tools are limited, so they do not want to use them when circumstances are available", Adachi said.