Further comments by BOJ board member, Makoto Sakurai
- What tools BOJ should use depends on economic development at the time
- If downturn is fairly small, BOJ may not need to deploy all available tools
- Domestic demand is more resilient than expected but can't be too optimistic
With Q4 set to be a testing time for the Japanese economy, it'll be interesting to see how much this triggers more easing talk by the BOJ in the coming months. All that said, I have mentioned this many times before...
For the BOJ, the threat of easing is their main tool to keep markets in-check. Their ammunition locker is pretty much running empty at this stage.
So, if they were to ease further without really amounting to much, it will backfire on them and the yen is likely to strengthen instead. This is the best analogy I can think of to quickly get this message across:
