BoJ: No appetite to tweak policy, yet – TDS

Mazen Issa Senior FX Strategist at TD Securities expects no changes to the BoJ's policy settings and suggests that the policy rate will remain at -0.10%, yield curve control intact with no additional flexibility, and forward guidance unchanged.

Key Quotes

“The statement should continue to highlight that the economy is expanding at a moderate pace.”

“There should be little change to the BoJ's outlook assessment. While inflation remains below target, it has evolved constructively in latest readings on a host of measures. Importantly, there are durable signs that pressures will continue to build in the pipeline.”

“There has been speculation that the Bank could introduce more flexibility at this meeting. It's possible that the BOJ could use the elevated higher UST yields to reduce the burden of a sole JGB adjustment. This could help reduce the impact on the currency (via the rate differential channel).”

“We view the risk of additional flexibility as low, given it was not too long ago a change was just implemented. Further, we have not seen an additional - or intentional - media blitz by BOJ officials to warn of such as we did in July. We note however that the latest minutes revealed that one member did favor allowing 10yr JGB yields to rise to 25bps, so if there was an adjustment, we would view this as the limit.”