Market expectations of an uber-dove at the Bank of Japan are overdone

Euromoney SkewSid Verma
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The now-likely prospect that Toshiro Muto will head the Bank of Japan in March would lead to a less-activist monetary stance than markets are pricing in, Capital Economics argues.

Last weekend, the Japanese economy minister Akira Amari said he wants to see the Japanese stock market rise 17% to 13,000 by the end of March, in comments that break new G7 territory as the first policymaker to promote an equity index target. The comments reinforced expectations the government will nominate an uber-dove to head the Bank of Japan (BoJ) in an attempt to arrest Japan's decades-long terminal decline.

Adding to this bullish narrative that deflation-fighting policies from the Shinzo Abe administration would intensify, Asian Development Bank president Haruhiko Kuroda – tipped as a leading...