Aug
06

Oil $15 Below Bank of Japan Assumptions Drives New Stimulus Bets

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FallingOIL PRICES are undermining the Bank of Japan’s efforts to spur inflation, threatening to overturn the consensus that policy makers are done with easing.

While BOJ Governor Haruhiko Kuroda has expressed confidence the current level of monetary stimulus can drive inflation to its 2 percent target in 2016, the market is looking less convinced. The gap between the 10-year and two-year Japanese government bond yields has narrowed to 42 basis points, down from 53 two months ago.

While economists see no immediate prospect of expanded stimulus — the BOJ kept monetary policy unchanged Friday as predicted — the flattening curve suggests bets it’s coming. The central bank’s inflation forecasts are based onOIL PRICES about $15 a barrel higher than the current benchmark level…

Oil $15 Below Bank of Japan Assumptions Drives New Stimulus Bets

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