Bank of Japan skeptical of their own policies

The Bank of Japan released the minutes for their April 26th meeting today which revealed that some members of the board were skeptical of the banks own monetary policy, which aims to rid the country of its ongoing deflation problem. The minutes stated that “a few members” felt the a goal of 2% inflation in two year was “difficult to achieve”. Questions were soon raised as to whether the Bank of Japan would stick to their guns with members seemingly against the policy from the start, which prompted declines in the nation’s primary index, the Nikkei 225.

Japan has been suffering with deflation for more than two decades, which has hampered the country’s attempts at economic growth following the global recession. Initially the monetary stimulus programme was greeted warmly by investors who pushed the Nikkei to record highs on one of the most impressive rallies in the last few years. Since concern over the longevity of the Federal Reserve’s $85 billion a month monetary stimulus package reared its head last week however, concern over the BoJ’s policies has slowly been creeping into the minds of investors.

At the close of play the Nikkei had declined by 3.2%, which is a huge decline that would ordinarily have caused widespread panic on the trading floor. However, with investors still recovering from the losses of Thursday, when the index declined by 7.3% in a single day, they were more than prepared.

Asian markets have been seemingly confused for the last few sessions and with so much confusion surrounding the actions of central banks themselves at the moment it’s hardly surprising. For example, the Bank of Japan is pumping money into their economy at an unheard of rate, which will drive up interest rates. However, the BoJ has also said they will keep those rates “in check”, so investors aren’t sure where their money is best placed. Until the exact actions of the central banks are confirmed, volatility in markets is almost unavoidable.