BoJ credibility on the chopping block - AGFxC

Greg Gibbs, Director of Amplifying Global FX Capital, suggests that the actions of the BoE stand in stark contrast the fumbling policy developments in Japan this year culminating in a hopeless response to heightened expectations last week. 

Key Quotes

“The BoJ have failed to manage expectations and communicate a clear policy agenda.  They have let the critical voices grow louder without response to the point where they appear to be gaining control of policy.

The 29 July BoJ statement said that the BoJ were re-evaluating its whole approach to monetary policy creating enormous uncertainty over policy direction.  Effective policy in Japan has tightened this year by way of a 20% rally in the JPY against the USD and a 15% fall in Japanese equities.  And in the last week even its long term yields have reversed half their fall since the beginning of the year with no improvement in inflation expectations.

It appears that the BoJ has lost its way and badly needs to regain the initiative, else USD/JPY will persist in its down-trend, push inflation further off course and leave the BoJ’s credibility in complete tatters.”