April 27, 2018

Governor Kuroda, lying won't help achieve your target

Summary

BoJ made an important change to its policy statement on April 27 by dropping the specific mention for when the bank expects to achieve its inflation target. The change may have been a sound decision, as the failure to achieve the target has been hurting the credibility of the BoJ. However, Governor Kuroda showed poor judgment by downplaying the significance of the change. In the press conference, he repeatedly said the BoJ never intended to impress upon the public when the bank expects to achieve the target and it was all misunderstanding by the financial market. That is a lie as the BoJ's published statement clearly shows. These miscommunication further undermines the credibility of the BoJ, eroding the effectiveness of its monetary policy. There has been a rumor that the BoJ may be about to taper its ETF purchase and the demeanor from Governor Kuroda suggests that the rumor may be true, however emphatically he denies it. After all the deception, who can believe a word he says?

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