Deutsche Securities: Bank of Japan May Adjust Description of Degree of Monetary Easing

Deutsche Securities believes that the Bank of Japan is at a "critical communication crossroads" and needs to decide whether to maintain the current forward guidance wording or adjust the description of the degree of monetary easing.

If the Bank of Japan continues to use the current wording, it will face a new challenge in the future if it raises interest rates to 1.25% – how to provide a reasonable explanation for further rate hikes. Since the lower bound of the Bank of Japan's estimated nominal neutral interest rate range is approximately 1.1%, and the 1% policy rate is already very close to this level, if rates rise further above 1.1%, it will be difficult to continue describing monetary policy as accommodative. (Jin Shi)