BOJ’s exit from QE may be more difficult than Fed’s – Nomura

Richard Koo, Chief Economist at Nomura, suggests that the Fed is paying close attention to its communications to ensure its policies do not come as a surprise to market participants.

Key Quotes

“Even so, Vice Chairman Fischer’s decision earlier in the year to express his real views on the pace of rate hikes in order to avoid future surprises ultimately ended up creating further market turmoil.

In contrast, the current BOJ governor seems to like using the element of surprise to maximize the effect of his easing announcements. This approach may be viable when a central bank is easing, but when it starts tightening it could create a situation in which the market no longer believes anything the governor says.

Given the credibility of Mr. Kuroda’s statements and the current level of long-term rates in Japan, I suspect Japan’s exit from quantitative easing may be far more arduous than the Fed’s.”