- Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute
After convincing investors in his readiness to double the nation's monetary base and end deflation the Bank of Japan Governor Haruhiko Kuroda is now facing a bigger test with a sustained sell-off in stocks. During this week's policy meeting, the BoJ kept its ultra-loose monetary policy unchanged and upgraded its assessment of the domestic economy, mentioning signs of improvement in exports and investment. However, the Topix index fell 16% from a May 22 high after Kuroda refrained adding more stimulus, while the Nikkei also saw wild turbulence in recent weeks, free-falling around 2,000 points after topping the 15,000 in May.
Risks are high that lawmakers will step up pressure on the BoJ's Governor to address market turmoil through additional monetary measures. On Tuesday, Kuroda pledged to extend the duration of its fixed-rate market operation in the upcoming months if necessary in order to stem any possible spike in bond yields.
In a separate report, the Cabinet Office said core machinery orders in the world's third largest economy plunged a seasonally adjusted 8.8% in April to 723.3 billion Yen, registering second drop in seven months. On a yearly basis, core orders tumbled 1.1%, beating expectations for a drop of 4.3% and following the 2.4% gain in the prior month.
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