After Japan's interest rate hike, the central bank governor's speech contains the most critical policy codes, where the repeatedly mentioned 'normalization steps' are much more worthy of attention than 'interest rate hikes' themselves. Understanding why 'normalization' is emphasized instead of 'tightening' will provide insight into the future direction of Japan's monetary policy.
First of all, from a policy perspective, Japan's ultra-loose monetary policy has been in place for nearly thirty years, which is an 'unconventional operation' in a special economic environment. Now that inflation continues to meet targets and wages are steadily rising, the fundamentals of the economy have met the conditions for exiting unconventional policies; 'normalization' is a choice in line with economic laws, while 'tightening' is a proactive contraction to address economic overheating, and the starting points of both are completely different.
Secondly, from the perspective of policy objectives, the core of 'normalization' is to bring monetary policy back to neutrality, neither stimulating nor suppressing the economy, while the core of 'tightening' is to curb inflation and cool down the economy. The governor clearly stated that the current policy interest rate 'is still some distance from the lower bound of the neutral rate range,' indicating that future adjustments will be 'returning to neutrality' rather than 'excessive tightening.'
Finally, from a risk perspective, Japan's government debt ratio has reached 229.6% of GDP, and aggressive tightening would significantly raise debt servicing costs, leading to fiscal risks. Therefore, 'gradual normalization' is the optimal solution that balances inflation control and fiscal stability, which is also the core logic that the governor repeatedly emphasizes.@男神说币 #比特币流动性 $BTC
