FRANKFURT : Policy normalisation by the Bank of Japan could test the resilience of global bond markets, the European Central Bank warned on Wednesday in an unusually strong message about policy prospects in another jurisdiction.Bank of Japan (BOJ) Governor Kazuo Ueda has said the central bank is un
resilience of global bond markets, the European Central Bank warned on Wednesday in an unusually strong message about policy prospects in another jurisdiction.
But with inflation exceeding its 2 per cent target, markets are rife with speculation the BOJ will soon phase out its massive stimulus programme that has been criticised for distorting market function and triggering an unwelcome yen fall that pushes up the cost of raw material imports. "Inflation in Japan has been increasing over the past year, leading market participants to expect the Bank of Japan to start normalising its monetary policy," the ECB added.
If Japan normalises policy, this could rechannel investments by Japanese investors who have a large footprint in global financial markets, the ECB warned.
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