Even after the ECB’s massive QE bomb yesterday, the BOJ might hold onto its current monetary policy. The stabilized markets and highly resilient domestic demand in Japan could help the BOJ stand against pressure.
Policymakers around the globe, including BOJ’s officials, are scheduled for a meeting next week in the wake of ECB’s quantitative easing. Alarming signals of the faltering global economy have gradually strained the confidence out of Japanese central bankers.
Officials of the BOJ have started to lean over easing the nation’s monetary policies. However, critics and lawmakers are still debating whether they should hold on or loosen the monetary policy.
Some BOJ officials are advising to hold on to their firepower in case of a worst-case scenario. The justification of their stance is that the bank is starting to run low in ammunitions.
On the other hand, as the market remains calm for the moment, other BOJ policymakers are considering keeping its current interest rates. The final decision will only be announced on the BOJ’s meeting on September 18 and 19.
But based on the suggestions of analysts, it might be time for the Bank of Japan to ramp up its game. The bitter trade war and the uncertainties that loom against the global economy should push an intense debate to Japanese lawmakers.
The Japanese yen may spike unless the United States Federal Reserve decides to announce a change in their monetary policies. The BOJ is not the only bank that is considering more stimulus, central banks around the world are all facing the same dilemma.
Haruhiko Kuroda, BOJ Governor, said in an interview last week that cutting interest rates deeper is in the options of the BOJ. Kuroda emphasized that the bank is currently taking into account the possible impact if the BOJ would ease.
According to a recent poll answered by economists, Japan’s exports will likely decline in the next report. The Japanese export rate is expected to have its sharpest fall in over three years.
The experts indicated that the increasing pressure from the Sino-US trade war have affected Japanese shipments. Japan’s August exports are expected to have declined 10.9% from the past year, recording the sharpest fall since 2016’s 14.0%.
If the export data does decline it will extend its losses to the 9th consecutive month since December 2018.
The prolonged trade war between the United States and China have started to weigh on exporting-heavy countries. Japan, known as a nation that relies on export, is one of the most affected country to date.
The trade dispute has helped slowd own the Japanese manufacturing activity and is weighing on business spending and earnings.
Aside from Japanese exports, the contracting Japanese consumer inflation rate added pressure on BOJ policymakers. Forecasts say that consumer inflation will hit its slowest pace in more than two years thanks to weak energy prices.
Japan’s core consumer price index is expected to expand by 0.5% in August from a year earlier. If the forecasts turn out correct, that would mark as the slowest price growth since July 2017.