Clarida is now a Pacific Investment Management Co (PIMCO) managing director and the firm's global economic advisor. He posted his thoughts on the Bank of Japan.
In brief:
After seeing years of disinflation or outright deflation, Japan’s policymakers are comfortable with the above-target inflation seen since early 2022.
Under the new leadership of Governor Kazuo Ueda, we’ve already seen several changes at the BOJ, including a material adjustment in July to its yield curve control (YCC) strategy.
If data indicate inflation can sustain more than the BOJ currently forecasts, which we expect, then the BOJ could abolish YCC late this year or early next.
At some point, as the economy reflates, we expect the BOJ will move away from the zero or below-zero short-term rates that have prevailed for over a decade. The policy rate could be hiked to 0% by early 2024.
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The Bank of Japan introduced YCC in 2016. YCC refers to the central bank purchasing Japanese government bonds to peg the 10-year yield at 0% and stimulate growth.
Bank of Japan Governor Ueda
