Strong dovish signal from BOJ

The Bank of Japan, one of the actors of volatility in financial markets, has reassured markets by giving a dovish signal for the first time after historical volatility. The bank’s vice president Shinichi Uchida drew attention to the excessive volatility in domestic and global capital markets and said that he believes they should maintain monetary easing at current interest rates for now. Uchida stated that Japanese authorities have the luxury of waiting for markets to calm down before making any decisions. The vice president clearly stated his dovish stance by saying, “Unlike the interest rate hike processes in Europe and the US, the Japanese economy is not in a position where the central bank will be pushed behind the curve if it does not hike rates. As a result, the bank will not hike rates when financial and capital markets are unstable.” Still, some economists argue that these statements do not mean that interest rates will not be hiked this year. Meiji Yasuda Research Institute economist Yuichi Kodama said, “Based on this statement, I think it would be premature to assume that there will be no interest rate hikes before the end of the year. Because a possible increase will depend on economic trends in Japan and the US. “I believe the BOJ will raise interest rates to 0.5% before the end of the year,” he commented.