Masahiko Loo of State Street Investment Management said that the Bank of Japan's interest rate decision was not a surprise, but its economic outlook is a different story. The Bank of Japan acknowledged that basic inflation is currently around 2%, making its assessment closer to reality. That is, for most of the past four years, conventional inflation indicators have been near or above the target. The debate is no longer about whether the Bank of Japan will promote policy normalization, but where the terminal interest rate will fall. “As Japan enters the synchronized global austerity cycle, our benchmark situation is still around 1.75%,” Loo said. “Using the Federal Reserve and the European Central Bank as a reference, the Bank of Japan has little reason to rush to act, especially when the US midterm elections risk causing fluctuations in foreign exchange and bonds. Bank of Japan Governor Ueda Kazuo can continue to depend on the data situation, leaving every meeting the possibility of action.

Masahiko Loo of State Street Investment Management said that the Bank of Japan's interest rate decision was not a surprise, but its economic outlook is a different story. The Bank of Japan acknowledged that basic inflation is currently around 2%, making its assessment closer to reality. That is, for most of the past four years, conventional inflation indicators have been near or above the target. The debate is no longer about whether the Bank of Japan will promote policy normalization, but where the terminal interest rate will fall. “As Japan enters the synchronized global austerity cycle, our benchmark situation is still around 1.75%,” Loo said. “Using the Federal Reserve and the European Central Bank as a reference, the Bank of Japan has little reason to rush to act, especially when the US midterm elections risk causing fluctuations in foreign exchange and bonds. Bank of Japan Governor Ueda Kazuo can continue to depend on the data situation, leaving every meeting the possibility of action.