Deutsche Securities Says Bank of Japan Faces Communication Crossroads on Forward Guidance

Deutsche Securities said the Bank of Japan is at a critical communication crossroads and must decide whether to keep its current forward-guidance wording unchanged or adjust how it describes the degree of monetary easing. According to Odaily, Deutsche Securities said that if the BOJ continues using its current language and later raises interest rates to 1.25%, it would face a new challenge of how to justify further rate hikes. The firm noted that the BOJ estimates the lower bound of its nominal neutral interest rate range at about 1.1%. It added that a 1% policy rate is already close to that level, and if rates rise above 1.1%, it would be difficult to continue describing monetary policy as accommodative.