BOJ vs. BOE: Battle of the Monetary Policy Biases

As expected, both the BOJ and the BOE decided to keep monetary policy unchanged for the meantime. Both central banks also reported that these decisions were agreed upon unanimously, but it appears that one is more hawkish than the other. Which one is it? Let’s take a look at the latest reports to find out:

BOJ Rate Statement

In today’s Asian trading session, BOJ Governor Kuroda and his men announced that they are not looking to expand the current QE program at the moment. This came as a surprise for some, as yen bears expected to hear some hint of dovishness after the government recently decided to implement a sales tax hike. Many thought that the infamously aggressive Japanese central bank would be revving up its stimulus in order to prevent the tax hike from taking its toll on overall economic activity.

However, BOJ policymakers decided to maintain their upbeat assessment for the economy as it continues to recover at a modest pace. They remarked that export activity will be sustained and that core CPI could hold steady at 1.25% for the next few months. They even upgraded their estimates for capital expenditures, as they predict that business investment will continue to strengthen.

BOE MPC Meeting Minutes

As for the BOE, the minutes of their latest monetary policy meeting revealed that MPC members were all in agreement that there’s still a bit of slack in the economy, with estimates ranging from 1% to 1.5% of the country’s GDP. They also noted that they want to see more evidence of an economic pickup before considering a rate hike.

More hawkish members pointed out though that the BOE could pursue a gradual rate hike approach. In this case, the MPC should consider starting this sooner rather than later.

Dovish policymakers, however, raised concerns about hiking rates earlier than necessary as this might lead to a substantial loss in output. They added that tighter monetary policy might increase the risk of a housing price bubble, as lower mortgage rates might lead to a sudden boost in home loan demand and push prices higher.

What do you think of these monetary policy highlights from the BOE minutes and the BOJ rate decision? Bullish or bearish for GBP/JPY?