Welcome to The Signal’s weekly “Macro Minutes.” Each week, we analyze the most important communications from a specific region and provide insight based on our quantitative analysis of central banks.
Nearly two weeks after the shocking Brexit vote, Bank of Japan (BOJ) Governor Haruhiko Kuroda decided to focus on the domestic Japanese economy in his speech before the bank’s regional branch managers. Rather than highlighting any negative effects of Brexit, Kuroda echoed the BOJ’s recently rising sentiment by stating his expectations of steady recovery for the Japanese economy.
Despite rebounding in sentiment over the past few weeks, the BOJ is still trending dovish, with Kuroda admittedly ready to pull the lever on further stimulus if necessary to achieve the 2 percent inflation target. Market analysts have pointed out that weak consumption and the global impact of Brexit could prevent this goal, but Kuroda seems undeterred.
After holding policy steady since the introduction of negative rates in January, all eyes will be on the BOJ during its monetary policy meeting at the end of this month. At that point the real effects of Brexit on the Japanese economy will become more readily apparent.
The bottom line: with currently rebounding sentiment and little acknowledgement from Governor Kuroda, the BOJ appears unaffected by Brexit. However, the bank’s policy meeting at the end of the month will reveal whether further stimulus is needed to maintain economic growth.