Although major central banks such as the US Federal Reserve have raised interest rates a few days ago, the Bank of Japan announced on June 17 that it will continue to maintain short-term interest rates at minus 0.1% and maintain long-term interest rates around zero by purchasing long-term government bonds.
Against the background of the widening interest rate gap between the United States and Japan, the yen is continuing to depreciate. The exchange rate of the yen against the US dollar hit 135.6 yen per US dollar on June 15, the lowest level since October 1998.
Why is the Bank of Japan bucking the trend?
The Bank of Japan maintained an ultra-easy monetary policy, mainly to promote sustained economic recovery.
Compared with other major economies, Japan's economic recovery is obviously insufficient.
In 2021, Japan's economy turned to slow expansion after shrinking for two consecutive years, but in the first quarter of this year, Japan's economy declined again due to the rebound of the epidemic.
Bank of Japan Governor Haruhiko Kuroda said that due to the impact of the new crown epidemic, the supply-side constraints faced by the Japanese economy continued, and both production and exports were affected to some extent.
Continued high international commodity prices also weighed on the Japanese economy.
In order to support the sustained recovery of the Japanese economy, the central bank will continue to adhere to the 2% inflation target, maintain an ultra-loose monetary policy, and pay close attention to the impact of domestic and foreign factors on the Japanese economy, and will not hesitate to introduce further easing measures if necessary.
The Japanese economy is weak, and the Bank of Japan does not dare to rashly change the direction of monetary policy.
(Getty Images)
Some experts expressed their understanding of the Bank of Japan maintaining an ultra-loose monetary policy.
Japan's Cabinet Office Economic and Fiscal Advisory Council private representative and vice-chairman of BNP Paribas Securities Global Markets Department Manai Nakakura pointed out that the Bank of Japan is indeed under tremendous pressure, but if it easily changes its long-standing ultra-loose monetary policy, it may undermine the market's trust in the Bank of Japan.
At the same time, sharp interest rate hikes in Europe and the United States may cause the economies of these countries to stall in the second half of the year and fall into a state of "stagflation".
The BOJ's choice is tough, but it will stick with it.
For details, please read the 323rd issue of "Hong Kong 01" e-Weekly Newsletter (June 27, 2022) "
Japan in Deep Structural Dilemma
".
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