- The chance of starting exit from monetary easing in the next 1.5 years is ‘not zero’
- But chance of that being delayed to 2, 3, or 4 years later is also ‘not zero’ unfortunately
And that’s a wrap. Ueda is finally done with his press conference and I would say that it was anything but smooth. Let’s try and take stock of the situation:
The backdrop coming into today’s meeting decision was that the BOJ is most likely to stick with its existing policy settings. Yes, there were a small percentage of market players hoping for a surprise but they were left disappointed.
But even if the BOJ did not deliver today, it is anticipated that they could look to bring in some changes – at least meaningful ones – to the forward guidance or yield curve control in the months ahead.
However, Ueda didn’t really offer up any hints of that and instead chose to focus his press conference on the supposed policy review that they will be conducting. The review is estimated to take more than a year to complete and markets are afraid it is going to take that long specifically before any tweaks or changes come about.
That is the reason why the Japanese yen fell right off the bat and continued to fall during Ueda’s press conference.
Sure, he tried to walk back on that plenty of times in his remarks but in trying to clarify things, it seems like his overcommunication only made things worse.
So, what is the bottom line and takeaway from all this?
I don’t think much has changed in terms of the policy outlook for the BOJ. They are still trying to strike a balance between guiding policy towards normalisation – albeit very slowly – while not wanting markets to get ahead of themselves on that.
I would argue that is still the main narrative for the Japanese central bank but Ueda’s mess of a press conference is distracting from the focus on that.
For the yen currency, the technicals seem to be doing the talking now but I don’t expect yen bulls to throw in the towel – at least not in the big picture. The long-term view is that the BOJ is eventually going to go down this policy path and that could reinvigorate yen bulls after a bit of a hiatus.