The Bank of Japan announced its September monetary policy today.
While the shift in the bank’s monetary policy stance to “quantitative and qualitative easing with yield curve control” has certainly created some talking points, it was the period before the decision that dominated market discussion today.
Why, in 2016, does the BOJ not have a set time to make such an important policy announcement? Every other major central bank does. Why should the BOJ should it be any different?
Though no one wants such a decision to be rushed, few will argue that the current system is, putting it mildly, inconvenient.
At a time when financial markets and the actions of central banks are so closely intertwined, the continuing absence of a set time is lackadaisical, creating unnecessary levels of volatility from the uncertainty over when the decision will actually be announced.
Markets participation dries up, volumes thin out and volatility picks up, all prolonged by the BOJ, courtesy of its own actions.
Thankfully today’s decision didn’t arrive on a Friday afternoon, a time often favoured by the BOJ to make major policy announcements. It also happens to coincide when market volumes are at or near the lowest levels in any given week.
The mind boggles as to the decision making process behind it. After lunch time on a Friday in Asia, what could possibly go wrong?
Releasing a major policy decision with no specified time and with market liquidity at its lowest. What could possibly go wrong? #BOJ
— David Scutt (@David_Scutt) July 29, 2016
Be it the timing of the decision or the date that it arrives, the current system is not good enough, and has to change.
If the bank can alter the schedule on which it holds monetary policy meetings — which it announced last year — it can make a set time and day for monetary policy decisions to be announced.
At a time when it is already starting to lose credibility from a policy perspective, this is the least it can do to help address that problem.
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