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Stronger Yen Stymieing BoJ’s Efforts to Boost Growth

05/27/2016

The recent sharp rise in the value of the yen is complicating the task of the Bank of Japan as it looks to fight deflation and revive economic growth, argues Mary Nicola, Aviva Investors’ Senior Economist of Asian Markets.

Key points

  • Bank of Japan’s efforts to reflate the economy are being foiled by the stronger yen
  • Spurring wage growth will be tricky when inflation expectations and union wage demands are falling
  • Negative rates are punitive for banks; other measures will likely be required to weaken the yen
  • A dovish Federal Reserve and pick-up in global sentiment may do more to stimulate sufficient inflation and growth than BoJ monetary policy
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