- The 0.50% to 1.00% frame is to respond to future risks
- Now, we have added room to deal with upward moves in interest rates
- Policy decision not biased towards tightening
- The 1.00% mark is defined as a “just in case” cap
- It is appropriate to maintain strong monetary easing
As mentioned earlier, this will very much be a teething process as markets have to try and figure out what is the BOJ’s appetite in tolerating higher yields above 0.50% and under 1.00%. There will be times that the central bank may view it as being an overstep but after a considerable period, they should loosen the reigns a fair bit more.
For now at least, expect them to maintain a close watch on things and we’ll see where they choose to draw the next “invisible line” above 0.50%.
This article was written by Justin Low at www.forexlive.com. Source