Dear clients,
The Bank of Japan will hold the final meeting of Governor Haruhiko Kuroda on Friday, but for now, investors remain on high alert in case Kuroda’s unexpected parting shot that could shake up financial markets around the world.
Market speculation is fueled by the lack of improvement in the functioning of the bond market, despite the fact that the Bank of Japan in December extended the target yield range for 10-year bonds precisely to address this problem. The move cemented Kuroda’s reputation for taking the markets by surprise.
It would also break custom among former Bank of Japan governors. Since the bank began issuing regular policy statements in 1998, none of the four governors who preceded Kuroda made any changes at their last meeting.
Most BOJ watchers don’t see Kuroda heading for a tightening on Friday, as it could fuel speculation about further changes after governor nominee Kazuo Ueda takes office a month from now.
However, the Bank of Japan’s quarterly bond market survey showed that bond market performance deteriorated to a record low earlier this month, supporting expectations that more action is needed.
During parliamentary hearings on February 27, Ueda indicated that he would need time before making any drastic changes to monetary easing. Ueda’s candidacy is expected to receive official parliamentary approval on Friday.
