Fitch Ratings believes the Japanese government’s exposure to potential financial losses at the Bank of Japan (BOJ) from monetary policy normalisation is likely be limited to the loss of the central bank’s budget contribution. However, even a relatively modest hit to the fiscal deficit could be significant for the sovereign rating given Japan’s fiscal path and debt dynamics, especially as it would occur at a time when the government’s interest costs are also rising. Fitch’s base case is for the BOJ to maintain ultra-loose monetary policy for the next few years, as outlined when we affirmed Japan’s rating at ‘A’/Stable ... (full story)