"Ueda is a dove"... Japan expected to maintain monetary easing in April

Low Likelihood of Policy Changes at April Meeting
Impact of Inflation and Global Banking Crisis
YCC Revision and Abolition Expected in June
'Unlimited Bond Purchases' Revision Premature

Kazuo Ueda, Governor of the Bank of Japan (BOJ), is expected to maintain the existing monetary easing policy at the April monetary policy meeting, which will be his first since taking office. It appears that he judged it premature to change the monetary policy as Japan's inflation rate has not yet stably reached the 2% range.

On the 26th (local time), Bloomberg reported that a survey of 47 economists showed that 87% of respondents predicted that the BOJ is unlikely to revise its monetary easing policy within this month.

Kazuo Ueda, Governor of the Bank of Japan (BOJ)

Only 13% of respondents expected a change in monetary policy. Among them, 11% anticipated that the BOJ might adjust the Yield Curve Control (YCC) policy, which involves unlimited purchases of government bonds to keep long-term interest rates at a certain level, at the April monetary policy meeting, while 2% foresaw the possibility of tightening.

Bloomberg explained, "Governor Ueda has consistently shown dovish tendencies in official settings, including the confirmation hearing, cooling market expectations for tightening."

Earlier, on the 13th, Governor Ueda expressed his intention to continue the accommodative monetary policy at the G20 Finance Ministers meeting. This was due to Japan's inflation rate not stably reaching the 2% range. Since May last year, Japan's inflation has hovered around the BOJ's target of 2%, but the BOJ diagnosed this as a temporary phenomenon caused by rising commodity prices. Governor Ueda forecasted that the core consumer price index, excluding food and energy, would fall below 2% in the second half of this year.

The global banking crisis, which began with the collapse of Silicon Valley Bank (SVB), has not completely ended, which is also analyzed as a factor delaying the BOJ's policy shift. An anonymous source related to the BOJ told Bloomberg, "With increased volatility in financial markets due to the global banking crisis, the BOJ is cautious about adjusting the 10-year government bond yield or abolishing the YCC policy."

Bank of Japan Headquarters
Photo by Yonhap News

The market predicts the timing of monetary policy changes to be in June this year. According to a survey conducted by financial information provider QUICK targeting bond managers, 46% of respondents predicted a high possibility that the YCC policy would be abolished or revised in June.

Market participants remain skeptical of Governor Ueda's statement to continue monetary easing for the time being and are closely watching for the timing of a policy shift. This is due to concerns that the BOJ might announce policy revisions without prior notice. Bloomberg reported, "Since the BOJ is expected to announce YCC policy revisions at an unexpected time to prevent large-scale government bond sales, it is likely to be difficult to gain investors' trust."

This content was produced with the assistance of AI translation services.