6 Nov 2013
Flash: BoJ Kuroda will not hesitate to expand QE if required - RBS
FXstreet.com (Barcelona) - The speech delivered by BoJ Kuroda on Tuesday clarifies further his strategy, notes Greg Gibbs, FX Strategist at RBS, who remains even more bearish on the Yen outlook mid term.
Key Quotes
"His success as a BoJ Governor is almost entirely based on delivering inflation. As such, if he should appear to be failing in this respect, we should expect him to enhance his quantitative policy easing."
"Secondly the aim of this speech and most communications is to influence inflation expectations by attempting to build confidence that his policy is working and will work. Some people may mistakenly presume that this means he is over-confident that his QQE policy is sufficient and thus he is not intending to do more."
"Kuroda surely hopes his existing QQE policy is sufficient to do the job, but he understands for it to work, at the very least, he must exude confidence that it will, otherwise why should anyone believe it will. This is why even though three out his nine person board have reservations that Japan will achieve 2% inflation on a sustainable basis in around two years, Kuroda always says that he is confident. The day he is not confident is the day he should and probably will further expand his QQE policy."
"So rather than getting bullish JPY on the basis that Kuroda may not expand QQE further if required, I read this speech as an indication that Koruda is eager to boost inflation expectations by exuding confidence and is so focused on this goal he will indeed expand QQE if required; as such it makes me more bearish JPY."
Key Quotes
"His success as a BoJ Governor is almost entirely based on delivering inflation. As such, if he should appear to be failing in this respect, we should expect him to enhance his quantitative policy easing."
"Secondly the aim of this speech and most communications is to influence inflation expectations by attempting to build confidence that his policy is working and will work. Some people may mistakenly presume that this means he is over-confident that his QQE policy is sufficient and thus he is not intending to do more."
"Kuroda surely hopes his existing QQE policy is sufficient to do the job, but he understands for it to work, at the very least, he must exude confidence that it will, otherwise why should anyone believe it will. This is why even though three out his nine person board have reservations that Japan will achieve 2% inflation on a sustainable basis in around two years, Kuroda always says that he is confident. The day he is not confident is the day he should and probably will further expand his QQE policy."
"So rather than getting bullish JPY on the basis that Kuroda may not expand QQE further if required, I read this speech as an indication that Koruda is eager to boost inflation expectations by exuding confidence and is so focused on this goal he will indeed expand QQE if required; as such it makes me more bearish JPY."