Although results weren’t as rosy for the leading indicators in May, the
figure hovers just below the 40 percent reading in the month prior,
suggestive of nothing earth shattering. What did grab the focus of
market participants was the notion that policy makers may indeed be
slowly moving to tighten monetary policy as earlier speculated.
According to the most recent Bank of Japan meeting minutes,
considerations of lowering the target reserves set by the central bank
were brought to the table. Lowering the reserve target to between 27
trillion and 32 trillion yen would effectively restrict the amount of
cash reserves available to lenders, and thus the economy as whole.
However, the notion was short lived against an overwhelming majority
vote as concerns over the sustainability of the economy remained.
Although this does, for the most part, put to rest any formidable
speculation on definite policy tightening plans by the BOJ, hope does
still linger. As mentioned before, further confirmation of rising
consumption may be needed to make optimism a reality.