Sometimes you can only shake your head at the confusion surrounding monetary policy.
The BOJ has set a 2% inflation target. While inflation has risen a little bit, it's still well short of the target. More importantly, market indicators suggest that Japan is unlikely to hit the 2% target going forward. Thus, this story makes no sense:
The BOJ's board members expect that prices will reach 2 percent around fiscal 2019. If this happens, there's no doubt that we will consider and debate an exit," Bank of Japan Governor Haruhiko Kuroda told parliament.
Can someone explain to me why the BOJ would believe that inflation will soon hit 2%? Ten-year bond yields are currently close to zero, vs. 2.9% in the US.
With prolonged easing straining bank margins, some analysts have called on the BOJ to raise rates before inflation hits 2 percent, arguing that it was too high a level to aim for in a country that has suffered from two decades of deflation.
If the BOJ tightens policy by raising rates before hitting 2% inflation, within a year or two they'll be back down to zero.
PS. Can someone tell me if I'm reading this table correctly? Are forward discounts on the dollar quoted in basis points? Does this table imply the 30-year forward dollar is trading at only about 50 yen?