Kuroda Downplays BOJ Impact on Stock Markets

The governor of the Bank of Japan, Haruhiko Kuroda, last night told reporters at a press conference held at the bank’s headquarters, that the moves seen in asset markets reflected better global optimism and were not the result of the bank’s ultra-loose monetary policy. There has been a great deal of concern expressed recently regarding the moves seen in the Nikkei which, despite the economic turmoil caused by the pandemic, has rocketed to fresh 30 years. Many critics have been keen to suggest that the rally is the obvious result of the massive wave of easing deployed in response to the crisis, along with government fiscal stimulus, coming on the back of more than ten years of BOJ easing following the GFC.

Monetary Easing Needs To Continue For Now

Despite the criticisms and accusations, however, Kuroda was keen to peg the rally to the broader uptick in investor sentiment amidst the global vaccination successes being seen and the forecasts of a return to normal this year. Despite the optimism, however, Kuroda was clear in acknowledging the uncertainty and risks which remain in the outlook, specifically with regard to the BOJ achieving its inflation target. Kuroda told reporters: “It’s likely to take significant time to achieve our price target. As such, now is not the time to think about an exit including from our ETF buying.”

BOJ To Review Monetary Policy Impact

In response to the concerns being shared by lawmakers, as well as those in the market, the BOJ recently announced the launch of a new monetary policy review which will be conducted in March, to assess the impact and sustainability of its measures. The review will include the bank’s ETF purchases which have drawn particular focus as asset prices continue to spike higher. On whether the current rally could be classed as a bubble, however, the BOJ head said it was difficult to determine but offered that “Optimism over the global economic outlook and steady vaccine rollouts may be behind the recent surge in stock prices” and said that ‘we won’t know until later whether recent stock rises are excessive.” In the meantime, Kuroda said that the bank “will continue powerful easing but will also be vigilant to potential financial risks associated with its ultra-loose policy.”

Technical Views

USDJPY

USDJPY has recently broken out above the bearish channel running from 202 highs. Following an initial move above the 104.63 level, price has since held a retest of the level as support and is now turning higher once again. Bulls will need to see a clean break of the 106 level now to carve out a proper base for a broader bullish reversal here targeting 108.08 thereafter.

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