3 Oct 2014
BoJ unlikely to meet 2% CPI level by April next year - BTMU
FXStreet (Łódź) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ believes that it isn't really possible for the BJ to meet the 2% inflation target exactly two years after the introduction of the QQE program, as previously suggested.
Key Quotes
"We have two BOJ monetary policy meetings this month with the first next week (announcement 7th Oct) and a wall Street Journal article yesterday reported that the BOJ would soon start to communicate to the market that the 2% inflation target should not be interpreted strictly as a target to be met in two years. If that was the case then the BOJ should be meeting the 2% level by April next year – two years after the start of the Kuroda QQE program."
"This makes sense to us as it is looking increasingly unlikely that inflation will lift to the scale expected by the BOJ. The global disinflationary impetus that is currently evident in commodity prices will certainly act to counter the recent depreciation of the yen."
"The yen is still weaker today though in part on the comment from BOJ Kuroda playing down the negative impact of yen weakness arguing that overall the weak yen was not a negative factor for the economy. The government today also announced an initiative to encourage large firms that benefit from yen weakness to help smaller firms that suffer through higher input costs to pass those costs on. Not much detail on this yet but the initiative itself is telling in that it conveys a government perhaps preparing for further yen weakness ahead."
Key Quotes
"We have two BOJ monetary policy meetings this month with the first next week (announcement 7th Oct) and a wall Street Journal article yesterday reported that the BOJ would soon start to communicate to the market that the 2% inflation target should not be interpreted strictly as a target to be met in two years. If that was the case then the BOJ should be meeting the 2% level by April next year – two years after the start of the Kuroda QQE program."
"This makes sense to us as it is looking increasingly unlikely that inflation will lift to the scale expected by the BOJ. The global disinflationary impetus that is currently evident in commodity prices will certainly act to counter the recent depreciation of the yen."
"The yen is still weaker today though in part on the comment from BOJ Kuroda playing down the negative impact of yen weakness arguing that overall the weak yen was not a negative factor for the economy. The government today also announced an initiative to encourage large firms that benefit from yen weakness to help smaller firms that suffer through higher input costs to pass those costs on. Not much detail on this yet but the initiative itself is telling in that it conveys a government perhaps preparing for further yen weakness ahead."