by Leika Kihara
TOKYO (Reuters) – The earthquakes that hit Japan at the start of the year have prompted several analysts to revise their expectations that the Bank of Japan (BoJ) will exit its negative interest rate policy at the end of its next meeting on January 22 and 23.
“With the earthquake, the likelihood of action at the January meeting has further decreased,” said Mari Iwashita, economist at Daiwa Securities, who revised her forecast for an end to negative rates in January to no anytime between now and April.
Analysts at Morgan Stanley MUFG Securities also pushed back their forecast for such a change in monetary policy to March or April from January initially.
In addition to the impact of the earthquakes, they rely on an interview with BoJ Governor Kazuo Ueda last week on public broadcaster NHK. In this interview, the central banker said he was in no hurry to ease monetary conditions, not being convinced that inflation would sustainably reach the 2% target set by the BoJ.
“Ueda signaled that the likelihood of action in January was low,” observes Takeshi Yamaguchi, Japan economist at Morgan Stanley MUFG.
“In addition, the BoJ must now examine the impact of the earthquake on the economy,” which further reduces the chances of action in January, he adds.
So far, many analysts believe that the various earthquakes which left at least 81 dead in western Japan should have a limited impact on economic growth.
Takahide Kiuchi, economist at Nomura Research Institute, put the damage at 812.1 billion yen (5.17 billion euros), or around 0.15% of Japan’s nominal gross domestic product (GDP).
At a New Year’s event with brokerages on Thursday, Kazuo Ueda said, without directly mentioning monetary policy, that the BOJ would take necessary steps to ensure that banking and financing conditions remain healthy in the regions affected by the earthquake.
(Reporting by Leika Kihara; with contributions from Takahiko Wada and Yoshifumi Takemoto, Blandine Hénault for the French version)
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