Nomura Research Institute: Bank of Japan Should Clarify Rate-Hike Mechanisms and Tightening Goals

Nomura Research Institute said the Bank of Japan is operating in an environment shaped by multiple overlapping factors, making policy decisions particularly complex. According to Odaily, the institute said the BOJ needs to communicate more clearly how interest rate hikes will affect the economy through specific mechanisms compared with past experience, and what outcomes are expected. It also said the BOJ should more explicitly explain the objectives of policy tightening. So far, the BOJ has described tightening as an “adjustment to the degree of monetary easing.” Nomura Research Institute said that if the BOJ includes “curbing upside risks to underlying inflation” and “restraining inflation expectations” among its rate-hike objectives, it would affect the pace of future rate increases and the BOJ’s communication approach. The institute added that whether this rate hike strengthens market and public confidence in the BOJ will largely depend on the performance of the deputy governor’s press conference after the policy meeting.