Almost two-thirds of Bank of Japan watchers now expect monetary policy change by June following the first extensive hearings of governor nominee Kazuo Ueda, according to the latest Bloomberg survey.
(Bloomberg) — Almost two-thirds of Bank of Japan watchers now expect monetary policy change by June following the first extensive hearings of governor nominee Kazuo Ueda, according to the latest Bloomberg survey.
All except three of 49 economists polled see no policy change at the final meeting of outgoing Governor Haruhiko Kuroda ending on March 10, according to the Bloomberg survey conducted following the two-day parliamentary hearings ended Monday.
Instead, there’s now a greater focus on the June meeting, set to be Ueda’s second.
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Some 41% of BOJ watchers expect a tightening step to take place in June according to the latest survey, jumping from 26% in the February poll that immediately followed Ueda’s nomination. Some 65% of economists now see a tightening move by June, up from 57% in the February survey.
The percentage of those expecting action in April, Ueda’s first meeting, dropped to 20% from 26%.
During hearings that spanned a total of nearly eight hours, Ueda repeatedly said it’s appropriate to continue with monetary easing. While Ueda gave no hint of a desire to pivot quickly, analysts appear to have made some recalibration for the BOJ’s policy path.
The BOJ is leaning toward monitoring the impact of recent tweaks to its stimulus program rather than making another adjustment next week, according to people familiar with the matter.
The survey result also showed that Kuroda is unlikely to give a final surprise next week by changing policy, although some flagged the risk of a parting-shot shock at the end of his decade-long term.
A key focus for the upcoming meeting is whether Kuroda will take another step to improve the functioning of financial markets. The governor widened the bank’s 10-year yield target band with the explicit aim of better functioning in December. But so far he’s widely seen to have failed in achieving that goal.
Some 84% said the BOJ didn’t enhance market functioning with the tweak, according to the poll. Yet more than half said Kuroda shouldn’t adjust the yield curve control this time.
“Kuroda’s role is over,” Shinichiro Kobayashi, chief economist at Mitsubishi UFJ Research & Consulting, wrote in his survey response. “He should leave every decision to a new leadership by standing pat in March.”
At the same time, many are warning of a risk that Kuroda will leave with a parting shot, following through on his reputation for surprise. Japan’s yield curve remains distorted, and the latest BOJ bond market survey showed a deterioration in the market’s view.
“We expect the bank to abandon yield curve control at the upcoming meeting as Governor Kuroda will want to preempt the inevitable rather than having a key policy reversed the moment he walks out the door,” said Marcel Thieliant, senior economist at Capital Economics.
Some 94% of respondents said Ueda is a good choice, or more or less a good choice to take the BOJ’s helm from April. The possibility of normalization this year increased due to Ueda’s nomination, according to 59% of the economists.
After Ueda cast doubt over the need to revise a 2013 joint statement with the government during his hearings, expectations among economists saw a major shift. Only 35% said its very likely or likely that the statement will be revised under a new BOJ governorship, down from 66% in the January survey.
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