ECB Lessons for BoJ
The Bank of Japan pledged last week to increase the frequency of JGB purchases again to reduce volatility in government bond markets. Avoiding repeats of the corrections seen in Japanese equities and undue attention to the country’s fiscal position – both of which are leading to financial instability – are the main drivers behind such changes. However, upon greater introspection and BoJ will probably be even more concerned that barely two months into their QQE programme, the efficacy of their policy is at risk of being seriously curtailed. Many of the destabilising factors are beyond their control, but in terms of expectations management, perhaps they could take a leaf from the ECB’s book.
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