Agency: The Bank of Japan must be very cautious an

Aihucha News on September 11: Institutional analysts said that another reason why we are skeptical about Ueda Kazuo’s hint of early adjustment of policy is that the Bank of Japan still has sufficient reasons to continue to implement stimulus policies. Second-quarter GDP data showed a fall in domestic demand, and while some progress was made in wage growth, the pace remained erratic. More broadly, the Bank of Japan's painful experience with its failed exit from unconventional policies suggests that it will be extremely cautious when ultimately making policy shifts. We believe it will take some time for the central bank to feel confident that it can safely pivot, even if policymakers confirm substantial progress in price and wage data. Our baseline scenario is that the central bank will remove "yield curve control" and negative interest rate policies in the second half of 2024 and adopt a more durable framework that can be maintained for a longer period of time. But we also recognize that upside risks to inflation and further weakness in the yen could prompt an earlier policy shift.