Andrew Rose Fund Manager Japanese Equities
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For professional investors and advisers only. This document is not suitable for retail clients.
The BoJ has committed to achieve the target “at the earliest possible time”. This was broadly as expected and brings the BoJ’s stated objective into line with that of the new Prime Minister, Mr Abe.
The detail of the announcement may have slightly undershot market expectations and the yen has strengthened marginally. Specifically, there were no additional asset purchases for 2013 announced. There was, however, a commitment to an open-ended asset-purchase programme which will begin from January 2014, once existing plans for 2013 have been completed.
The BoJ’s forecast of consumer-price index inflation for this fiscal year (ending March 2013) is -0.2%, followed by +0.4% (March 2014) and +0.9% (March 2015). The fact that these current expectations are below the new inflation target of 2%, or even the previous 1% goal, may cause some to question the level of commitment to the new objective.
However, this is not the end of the monetary policy story. In particular, Governor Shirakawa’s term ends in three months and the focus has already turned to the identity and likely stance of his successor. Mr Shirakawa faced a tricky balancing act today of accommodating some of Mr Abe’s wishes while not being seen to cede too much ground in terms of central bank independence.
Consistent with most statements during his term in office, Mr Shirakawa was today again (and in our view not unreasonably) at pains to point out that an end to deflation hinges not just on monetary policy, but on a broader menu of policy options aimed at addressing long-term growth trends.
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Source: ETFWorld – Schroders
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