Sudden increase in interest in the BOJ's exit strategy premature?- Nomura

Analysts at Nomura explained that BOJ Governor Haruhiko Kuroda remains cautious about publishing the results of simulating an exit Sudden increase in interest in BOJ's exit strategy.

Key Quotes:

"At the end of May and beginning of June BOJ Policy Board members, Makoto Sakurai and Yutaka Harada made speeches to groups of business leaders, giving their views on monetary policy."

"Both will remain Policy Board members even after the retirement of BOJ governor Haruhiko Kuroda and deputy governors Kikuo Iwata and Hiroshi Nakaso in 2018."

"We think it is useful to know their views as they will shape postKuroda monetary policy. In his speech, Mr Harada talked about the BOJ's exit strategy and mentions the possibility that the BOJ may post losses during this process."

"In his view, however, the likelihood that the BOJ will eventually return to profit means that, even if it posts temporary losses, confidence in the yen is unlikely to be lost. In his testimony to the House of Representatives' Committee on Financial Affairs on 10 May, Mr Kuroda was asked by Seiji Maehara of the Democratic Party to publish the BOJ's simulation of its exit strategy."

"However, Mr Kuroda remained cautious about doing this in case it caused more confusion.

In our view, the BOJ is unlikely to seek an exit that would involve raising the interest rate it pays on current accounts anytime soon as achieving its 2% price stability target will be no easy matter.

We, therefore, think that the sudden increase in interest in the BOJ's exit strategy is slightly premature."