William Pesek; Big risk by BOJ!

I could not agree more with William Pesek's (Bloomberg) recent column about the Japanese central bank's decision to end the policy of ultra-loose monetary policy; (here and here.)

(William Pesek) 

"Why the urgency? Couldn't the BOJ wait another few months? These very valid questions may not get much attention amid the euphoria of Japan's return to the economic plus column. The end of its almost eight-year bout with deflation is viewed as a fait accompli; few doubt it will soon be confirmed statistically."

 (...)

"There's no telling whether that's the case this time around. And since the BOJ hasn't begun boosting rates yet, it's impossible to predict how aggressive policy makers are prepared to be. After years of persistent deflation, the BOJ seems to think it will soon face an uncontrollable surge in prices, like a beach ball held underwater suddenly shooting higher.

Clouding the Outlook

That's misguided. Deflationary pressures unleashed by China and India may cap Japanese prices. So might the government's failure to shore up the national pension system, something that would give consumers more confidence about the future.

Amid so many uncertainties, the BOJ should keep its options open. Instead, it's pursuing a single-minded desire to naturalize Japanese interest rates. It may be a harbinger of disappointment for the economy."

Go read this article ASAP ... it is really good!