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16 Mar 2015
BOJ to leave its policy unchanged this week - Nomura
FXStreet (Bali) - Yujiro Goto, FX Strategist at Nomura, shares his view ont he upcoming BoJ policy outcome, noting that the BOJ is expected to leave its policy unchanged on Tuesday.
Key Quotes
"We expect the BOJ to leave its policy unchanged again this week (16-17 March). Inflation momentum remains weak owing to lower oil prices, but the BOJ has made its position clear that it will not adjust its policy just owing to a slowdown in CPI inflation owing to declining oil prices, unless it changes the trend of inflation and inflation expectations."
"Market-based break-even inflation has been recovering as oil prices have been stabilising. Household survey-based inflation expectations inched down in February, but we think it is too premature for the BOJ to judge that the trend in CPI inflation expectations has changed. Thus, the Bank is likely to stay on the sidelines for now to monitor the result of wage negotiations and any second-round impact of oil price declines on inflation expectations."
"The Bloomberg survey also suggests expectations for an April easing have scaled down from a month ago, while the JCER survey shows virtually no change in expectations for an April easing from February. Limited expectations for a BOJ easing would limit any downside risk of USD/JPY after the likely announcement to leave its policy unchanged."
"Although the BOJ downgraded its FY2015 inflation forecast in January, the divergence between the BOJ and private forecasters’ projections keep widening. The next forecast update is scheduled for the second April meeting (30 April), but the BOJ has changed its assessment on current inflation momentum to “around 0.5 percent”) from “in the range of 0.5-1.0 percent” at the previous meeting. January core inflation has slowed to +0.2% after excluding the consumption tax hike impact, and the Bank may need to downgrade its inflation assessment further."
"Governor Kuroda is likely to reiterate the importance of the trend in inflation, but a further downward adjustment in the inflation assessment could sustain market expectations of a BOJ easing, while the adjustment is not strong enough to meaningfully increase near-term easing expectations."
Key Quotes
"We expect the BOJ to leave its policy unchanged again this week (16-17 March). Inflation momentum remains weak owing to lower oil prices, but the BOJ has made its position clear that it will not adjust its policy just owing to a slowdown in CPI inflation owing to declining oil prices, unless it changes the trend of inflation and inflation expectations."
"Market-based break-even inflation has been recovering as oil prices have been stabilising. Household survey-based inflation expectations inched down in February, but we think it is too premature for the BOJ to judge that the trend in CPI inflation expectations has changed. Thus, the Bank is likely to stay on the sidelines for now to monitor the result of wage negotiations and any second-round impact of oil price declines on inflation expectations."
"The Bloomberg survey also suggests expectations for an April easing have scaled down from a month ago, while the JCER survey shows virtually no change in expectations for an April easing from February. Limited expectations for a BOJ easing would limit any downside risk of USD/JPY after the likely announcement to leave its policy unchanged."
"Although the BOJ downgraded its FY2015 inflation forecast in January, the divergence between the BOJ and private forecasters’ projections keep widening. The next forecast update is scheduled for the second April meeting (30 April), but the BOJ has changed its assessment on current inflation momentum to “around 0.5 percent”) from “in the range of 0.5-1.0 percent” at the previous meeting. January core inflation has slowed to +0.2% after excluding the consumption tax hike impact, and the Bank may need to downgrade its inflation assessment further."
"Governor Kuroda is likely to reiterate the importance of the trend in inflation, but a further downward adjustment in the inflation assessment could sustain market expectations of a BOJ easing, while the adjustment is not strong enough to meaningfully increase near-term easing expectations."