-- Bank of Japan Governor Kazuo Ueda’s path to policy normalization got a lot rockier after market ructions this week, leaving him facing multiple risks ahead.When Climate Funds Pay for Highway Expansion
“The BOJ has got it wrong,” said Atago, who is also a former BOJ official. “The language of monetary policy should be data.”“While the main reason behind the crash this time was concerns over a US hard landing, the BOJ has created unnecessary noise,” said former BOJ official Masamichi Adachi, currently an economist at UBS Securities. “The policy decision itself was problematic but there were communication problems as well.”The BOJ isn’t alone in facing communications challenges.
In some ways, investor complacency after such a long period of steady BOJ policy made the likelihood of jumpy markets inevitable when it came time for Japanese authorities to exit. Markets have yet to settle. While the Nikkei 225’s implied volatility has calmed after the index’s recent gains, it’s still about double the daily average this year through July 31, before the rout began. Investor uncertainty on the outlook for Japanese assets remains high, with one option market gauge of expected swings in the yen trading about 60% higher than its 10-year average on Friday.
Leading up to the July decision, the central bank faced unusual political pressure. Two senior members of the ruling party weighed in on BOJ policy and the weaker yen, seemingly advocating for a hike that would buoy the currency.
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