The BOJ is in a race up against the clock right now but perhaps that might not matter too much. As noted in yesterday’s post here, policymakers will still spin the narrative to however they want and not what might make sense to you or me.
“For now, both the headline and core reading is still keeping above the 2% mark but if they are slowing down, how will Ueda & co. position themselves to argue that such a trend can be identified as “sustainable” when it previously was not when moving higher?
“At the end of the day, it’s not about what makes sense anyway. It’s all about what central banks want to believe and as market players, we all just have to listen. That’s the unfortunate reality of trading these days. Integrity has long left the chat, even well before the Covid pandemic.
“If the BOJ is adamant that all the conditions still warrant a change in policy stance next year, they are well within their means to call it so. But as inflation pressures begin to ease and perhaps may ease further in the months ahead, it will cast some doubts over the response by the central bank and the timing of it all – especially since when they could have done so already this year.”