While the announcement of Abe’s resignation caused the yen to gain as much as 1% in the evening in Tokyo, the BOJ will continue to closely watch market developments, according to the people. The bank maintains its pledge that it will act without hesitation if necessary, the people said.
With the economy still healing from the biggest contraction in the post war era in the second quarter, an excessively strong yen will put pressure on the central bank to act if sustained. Abe came to power in 2012 pledging aggressive monetary easing and handpicked Kuroda to deliver it. Kuroda soon launched the “shock and awe” monetary bazooka, which increased asset purchases, leading the BOJ’s balance sheet to swell significantly larger than its global peers.
BOJ watchers will be closely monitoring who will replace Abe, because Kuroda is seen to have coordinated well with the government under the premier. The latest symbolic move was a joint statement between Kuroda and the government as the pandemic battered the economy.
Abe was driving force behind the global transition to simultaneous monetary and fiscal stimulus. His policies have been adopted at least in part by a host of countries as interest rates have trended towards zero.Click HERE to subscribe to Fuller Treacy Money Back to top