The Bank of Japan has a new governor in place
. Now whenever there's a change of leadership at a
central bank, households, businesses investors, they are
going to worry will interest rates go up. Will
those investment plans make sense? Will mortgage payments.
Rocket will markets buckle in Japan. Things are much
more complicated because the central bank over the past decade
has spent$11 trillion buying up bonds, stocks other
assets in a bid to generate inflation. That's right
, generate inflation. While other central banks all around
the world are trying to get inflation down, Japan
has spent the last 10 years trying to get prices
to go up. Now, inflation here is currently
around 3%. So still quite quite modest by international
standards. But the important thing is that the Bank
of Japan has a 2% inflation target and inflation has
been above that now for the past 12 months.
And this is one of the factors that is fueling
expectations that rider will change policy. He could call
for a review of policy that would mean change later
on. He might adjust guidance for the conditions of
changing policy in the future. He might scrap a
cap on 10 year government bond yields. That's a
key part of the B J's rather complex stimulus program
. But it's very unlikely he's going to raise short
term interest rates without doing one of these things first
or all of them, the majority of them don't
expect him to act right away. And we also
know that officials are wary of making any changes so
soon after recent financial sector jitters. That's according to
people familiar with. There is also speculation of a
possible early election in Japan Prime Minister from Kisha isn't
going to want the guy who is just put at
the top of the Bank of Japan to then ruffle
markets bonds currencies, everything else while he is in
an election campaign.