The policymakers of Bank of Japan have warned about the impending danger of the global economic outlook. Due to the recent fall in price of oil, their long awaited inflation target of 2% is now postponed. On December 28th, 2018, this has been informed by a gist of opinions in the December’s review of the bank. A significant member has come up with his opinion concerning the matter. He mentioned that the global economic outlook has become highly uncertain. And if the present conditions continue to exist, the risks would all end up pulling it downward.
During the meeting in December, the monetary policy of BOJ was quite stable. However, the governor notified of the increasing risks regarding the economic outlook. Many have pointed out hints of a major slowdown in the economy of China. While others have said the trade tensions between China and US has an impact on Japan’s business as well.
Markets are in a big confusion, more after BOJ’s decision in July to let the long term market rates range between -0.2% to +0.2%. They are waiting to see whether BOJ allows the rewards of the 10 year bond to meet negative consequences. A member has said that it would be wise for now to let the long term rewards be negative. This will help to keep the monetary policies loosely bound.
However, many do not agree to the idea. They feel that the pace at which BOJ is buying bonds is quickly drying up the liquidity of the market. Besides, it is also making the margins of financial institutions smaller by pushing down the long terms rates extremely low. It would be good for BOJ to make some revisions in their market operation policies. This might help in keeping the gains lower, along with the purchases.