BNP Paribas expects Bank of Japan to amend policy statement

According to chief credit strategist at BNP Paribas Japan Mana Nakazora, the Bank of Japan should shift from its monetary policy measures. Thus, the central bank would be more flexible in adjusting interest rates to the differential pace of monetary policy tightening across countries.

The government together with the Bank of Japan should revise the monetary policy strategy, agreed on in 2013, she said. The main point is to maintain ultra-loose monetary policy until inflation achieves its target of 2%.

In her view, a shift in Japan’s monetary stance would allow the central bank to win the freedom to decide interest rates. 

The Bank of Japan should make it clear that interest rates could rise or decline depending on economic developments. According to the credit strategist, it should give a hint that ultra-loose monetary policy is coming to an end.

Markets are beginning to price in the chance of the Bank of Japan’s further monetary policy shift. However, even if Japan makes it through, interest rates in Japan will be well below those seen in the US and Europe.