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13 Feb 2013
Forex Flash: Further shift in BoJ polices ala 'gold standard exit' needed - Nomura
Nomura strtegist Yujiro Goto compares the Abenomics with that implemented by the Japanese Finance Minister Takahashi in the 1930s, as also indicated by Finance Minister Mr. Aso.
Yujiro notes: "Inflation and economic growth recovered remarkably under Mr. Takahashi's tenure while asset prices rose and interest rates were anchored. The impressive market reaction and improving economic outlook so far suggest to us that the policy is moving in the right direction, as happened in the 1930s."
The Nomura strategist adds: "However, monetary, fiscal, and FX policy may face a higher hurdle than in the 1930s: the 0 bound for interest rates, necessity of the consumption tax hike, and potential criticism from the international community, for example."
"Clearer changes in the BOJ monetary policy framework under the new BOJ leadership will also be necessary which could be comparable with the then exit from the gold standard. BOJ leadership nominations, scheduled to be announced in a few weeks,
and further changes in policy framework will be very important in this context" Yujiro concludes.
Yujiro notes: "Inflation and economic growth recovered remarkably under Mr. Takahashi's tenure while asset prices rose and interest rates were anchored. The impressive market reaction and improving economic outlook so far suggest to us that the policy is moving in the right direction, as happened in the 1930s."
The Nomura strategist adds: "However, monetary, fiscal, and FX policy may face a higher hurdle than in the 1930s: the 0 bound for interest rates, necessity of the consumption tax hike, and potential criticism from the international community, for example."
"Clearer changes in the BOJ monetary policy framework under the new BOJ leadership will also be necessary which could be comparable with the then exit from the gold standard. BOJ leadership nominations, scheduled to be announced in a few weeks,
and further changes in policy framework will be very important in this context" Yujiro concludes.