HARUHIKO KURODA added another instance to his record of wrong-footing financial markets this week. Confronted with a rising yen and tumbling inflation, the thinking went, the central-bank governor had little choice but to shore up the credibility of the Bank of Japan (BoJ) with even looser monetary policy. But in the end the BoJ kept its stance unchanged. Markets reacted swiftly after the decision on April 28th: the yen jumped and the Nikkei 225 stockmarket index slumped.

Since introducing an interest rate of -0.1% on excess bank reserves in late January, Mr Kuroda has been hauled before parliament no fewer than 32 times to explain himself. Perhaps that has left him gun shy. Or perhaps the BoJ’s inaction is a hint to Shinzo Abe, the prime minister, that monetary policy should bear less of the burden of dragging Japan’s economy out of the slough of low inflation and growth.

Many economists reckon, nonetheless, that the BoJ will have little choice but to ease again soon. Mr Abe’s policies have failed to produce much growth or inflation, partly due to a falling oil price and China’s slowdown. GDP contracted by an…Continue reading