Bank of Japan unlikely to tighten its monetary policy by end-2018 – Nordea Bank

Japan’s central bank, the Bank of Japan, is unlikely to tighten its ultra-loose monetary policy by the end of next year as the nation continues to struggle to push inflation towards 2 percent in spite of the above-potential economic growth, noted Nordea Bank in a research report. The lack of domestic inflation is main concern.

The Bank of Japan has recently cut its inflation projection for this year and the next year, yet it continues to be dedicated to reach the 2 percent target in the medium-term. This implies that, contrary to other major central banks, the BoJ is unlikely to ease monetary policy in the forecasting horizon. If market confidence is to fall, along with JPY appreciation due to its status as a safe-haven currency, additional easing of the policy cannot be excluded.

The recent change in the composition of the Monetary Policy Board with the hawks having been replaced by supporters of aggressive monetary policy shows that the central bank would be prepared to test the boundaries of unconventional monetary policy if required, added Nordea Bank.

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