The BOJ's monetary meeting concluded Tuesday with no change to its current ultra-low interest rate at -0.1%, a stance it's held since 2016.
We believe today's surprising decision could be regarded as a gift for the new leadership, which may pursue chances to start more legitimate policy normalization.Economists at Nomura disagreed and said the move to modify the yield curve control band does not necessarily indicate a change in the BOJ's monetary policy direction.
Analyst Kyohei Morita emphasized the initial setting of the yield curve control policy of 25 basis points on either side of the 0% target for JGB yields was based on their impact on fixed business investment, or "fundamentals." "By contrast, the new fluctuation range of around ±0.5ppt is based on considerations other than fundamentals – in other words, the side effects of the YCC policy," he said.
"We think that it should not be interpreted as a beginning of the tightening process reflecting an achievement of inflation targeting," it said in a note, pointing to BOJ Governor Haruhiko Kuroda's comments denying that the decision was a rate hike. "The governor also emphasized that he still believes that elevated inflation will prove temporary. We share this view and believe that inflation rate will start to decline since H2 2023," it said.
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