BOJ faces fresh challenge as politics, yen complicate rate hikes
TOKYO -Bank of Japan Governor Kazuo Ueda's efforts to lift rock-bottom borrowing costs face fresh challenges as a yen rebound and the new political leadership's preference for loose monetary policy raise the hurdle for rate hikes.
"I don't think the remarks were intended to apply huge pressure on the BOJ. Rather, Ishiba probably had the election in mind," said Katsuhiro Oshima, chief economist at Mitsubishi UFJ Morgan Stanley Securities."He was seen by markets as a hawk, so may have wanted to fine-tune that image a little bit."
The bold shift to a tightening bias, however, hit a snag this week with Ishiba's new cabinet reaffirming with the BOJ a 2013 statement that commits both sides to focus on reflating a stagnant economy. With inflation exceeding 2% for well over two years and a tight labour market pushing up wages, pausing for too long could cause communication problems.
There is also uncertainty on whether Ishiba would revert to his endorsement of a BOJ exit once the election is out of the way - as many policymakers and analysts expect.
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