BOJ and BOE summary 13 June 2022

BOJ

Bank of Japan Governor Haruhiko Kuroda said in a statement that the Japanese economy is still at a point of high uncertainty and that they will maintain their supportive monetary policy as needed. This policy is the inverse of many of the Central Banks where they are currently withdrawing stimulus rather than the opposite.

He also said that pandemic and rising commodity prices are one of the biggest risks to the economy. As such they will keep a close eye on possible impacts on the economy and make adjustments as needed.

The Japanese economy is showing some signs of weakness but some data reveal that they are on a path to recovery. Much of the problem is the rising price of energy, something that the BOJ is willing to tackle, given that these prices are a major contributor to the current 2% inflation.

It maintains a target of 2% annual inflation, a target that is close to being reached if it can be maintained until the end of the year. Something that will be difficult to achieve in the current macroeconomic context.

BOE

On the opposite spectrum of Central Banks, we have the Bank of England, led by Andrew Bailey. It was one of the first banks to start raising its reference interest rate.

With a 40-year high of 9.1%, Governor Bailey believes they will reach their target of 2% in about 2 years. They also expect to reach peak inflation of 11% in October, a forecast that they expect will not require adjustment.

With monetary policy expected to be maintained, many investors anticipate a hike of 0.50% or more at the next Bank of England meeting.

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