2023-07-20 21:00:00
Mitsuhiro Furusawa, a former finance minister and chairman of the Sumitomo Mitsui Banking Corporation Institute for International Finance, believes that there will be no revisions to the yield curve control (YCC) policy at this month’s monetary policy meeting, in light of recent remarks by Bank of Japan Governor Kazuo Ueda, who has left an impression of a dovish stance on monetary policy.
Former Finance Minister Furusawa initially predicted that the YCC could be revised at the BOJ meeting on the 27th and 28th, but pointed out that if it were to be revised at the same meeting, it would be a “quite a surprise.” Governor Ueda has shown a stance of emphasizing dialogue with the market since he took office, and expressed his view that the possibility of such dialogue is low. 20, he said in an interview with Bloomberg.
Mitsuhiro Furusawa Former Finance Minister
Source: Sumitomo Mitsui Banking Corp.
Governor Ueda said at a press conference after the G20 finance ministers and central bank governors meeting held in India on the 18th that if there is no change in the recognition that there is a long way to reach a sustainable and stable price target of 2%, the stance of persistently continuing monetary easing will not change. The contents of the report show that the dovish stance remains unchanged, and the speculation that the policy revision at the July meeting, which had been spreading in the market, has receded.
If the distance from the price target remains unchanged, the stance of continuing easing will not change – BOJ Governor
However, Mr. Furusawa pointed out that YCC is a “fairly irregular policy” that is being implemented only in Japan, and that it will need to be reviewed at some point. While promoting dialogue with the market that the YCC revision is not a monetary tightening, he mentioned that the earliest possible time of the year would be desirable, and that September or October is possible. As a method, instead of gradually expanding the fluctuation range of long-term interest rates from the current level of around 0.5%, he said that it would be preferable to abolish it all at once.
While he said that the revision of the YCC has the risk of causing the yen to appreciate, he explained, “It is just a review of the method of monetary policy, and it does not mean that the fundamentals have changed significantly.” “It will be a factor in the appreciation of the yen, but it does not mean that the yen will appreciate all at once,” he said.
Easing revision after next year
Regarding monetary easing measures, Furusawa said, “Japan’s economy is not overheated, and the stance of continuing easing is not bad.” He sees it as “impossible to change the monetary easing stance this year” in the sense of correcting negative interest rates.
In the foreign exchange market, the strong dollar and the weak yen continued due to the difference in the direction of monetary policy between Japan and the United States, and at the end of June, the dollar was temporarily above 145 yen to the dollar for the first time since November last year. After that, the yen rose to the 137 yen level on the back of speculation that the Bank of Japan would revise its policy, but yen-selling pressure is smoldering against the backdrop of the Bank of Japan’s easing stance.
Mr. Furusawa predicted that future revisions to monetary policies in Japan and the United States “wouldn’t lead to sudden movements in exchange rates.” Even if the U.S. interest rate hike cycle takes longer than expected and it takes time for Japan to get out of its accommodative policy, the U.S. economy slows and the trade deficit shrinks.
He added that the sharp depreciation of the yen is not as high as last year’s situation, as more import prices have been passed on to prices, and sentiment toward the yen’s depreciation is different from last year’s.
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