Japan may tighten monetary policy

Significance

BoJ Governor Haruhiko Kuroda described it as a 'technical adjustment', but markets were unconvinced: stocks dropped globally, the yen surged and bond yields shot up. Traders suspect the change is a precursor to ending the Bank's current loose monetary policy when Kuroda retires in April.

Impacts

• The scale and global integration of Japan's financial sector mean that even hints of changes to official policy have worldwide implications.
• When the BoJ finally changes course officially, the process could be messy, especially since Japanese firms have become used to cheap money.
• Wage pressures are modest in Japan, despite a tight labour market.