Analysis-BOJ sees window for rate hikes narrowing but not closed yet

Written by Lika Kihara

TOKIO (Reuters)-The Bank of Prices Discrimination in the Bank of Japan has been facing its largest test since the ruler Kazu Oda took over two years ago, with US President Donald Trump’s tariffs rapidly rapidly for further increases in unlimited borrowing costs.

After BOJ’s decision on Thursday to keep interest rates fixed by 0.5 %, UEDA said that the timing of the basic inflation of rapprochement towards the central bank’s goal by 2 % may have been “somewhat pushed” – which mainly indicates a temporary stop in interest rates for further clarity in falling from the high definitions.

But continuous food inflation, may mean food inflation, the prospects for increasing persistent wages and fears of renewal of falling in the yen, that BOJ has many reasons for not giving up its plans to raise prices completely.

It is possible that the accurate balance law means that BOJ will continue to indicate that its next step will be a picnic, but the markets are left to guess the pace and time of future work.

“The worst scenario for BOJ is eventually delaying the achievement of inflation by 2 % through follow -up with high prices amid high uncertainty,” said Akira Outani, a previous preacher in BOJ, who is currently the administrative director of Goldman Sachs Japan.

“In this way, the most desirable approach is to postpone the high prices as a preventive measure,” said Utani, who regained the estimated time to raise the next rate for six months until January.

Goldman still expects BOJ to eventually increase its policy price to 1.5 % in the current deportation cycle of the rate.

On the surface, the threat of the economy that depends on export in Japan from the World Trade War may be sufficient to give up its bias to raise prices in favor of the most neutral monetary policy position.

In light of the new expectations issued on Thursday, BOJ expects the economy to expand hardly over its capabilities this year. It also reduced inflation expectations and saw deviant risks to the downside, a sign of its condemnation of the price momentum.

UEDA warned of “very high uncertainty” in the future outlook, even stressed BOJ’s intention to maintain rates of rates on the opinion that the basic inflation will be recreated towards its goal, shortly after the recession.

History has proven difficult to normalize extremist monetary policy in Japan. The country has not seen a short -term rate of more than 0.5 % in three decades, with attempts to raise it over and over again due to the growth of stagnant wages and external shocks.

Is this time different?

This time, however, stopping for a long time is not without cost.

Unlike the past when Japan was mired in shrinkage, the basic inflation has exceeded the goal of BOJ 2 % for a period of three years as the costs of high raw materials for high rise prices.