22 Dec 2014
Expect further monetary easing by the BoJ in October 2015 – Nomura
FXStreet (Barcelona) - Research Analysts at Nomura feel that the BoJ has failed to factor in the possibility of inflation falling to almost 0% as a result of probable lower oil prices in the future, anticipating BoJ to implement further easing in October 2015 to counter this.
Key Quotes
“The content of the BOJ governor’s press conference suggested to us that the BOJ is unlikely to roll out further monetary easing measures in 2015 H1 in response to lower crude oil prices. Indeed, we maintain our view that the BOJ's next round of further monetary easing is likely to be in October 2015.”
“Nevertheless, we should probably keep in mind the risk of additional monetary easing measures in the first half of the year. If the price of North Sea Brent crude oil remains at around $60/barrel, core CPI inflation could well fall to around 0% in 2015 Q2. Given that the BOJ’s latest monetary policy statement stated that "the year-on-year rate of increase in the CPI is likely to be around the current level for the time being," we do not think the BOJ has factored in the possibility of inflation falling to almost 0%.”
“The BOJ is only too aware that a sharp fall in inflation could trigger a fall in inflation expectations, and we cannot therefore completely rule out the BOJ implementing additional monetary easing earlier than expected in the event that lower crude oil prices set in motion a sharp decline in inflation.”
“In that sense, we think that there will be keen interest in whether the BOJ's Interim Assessment of the Outlook for Economic Activity and Prices (Outlook Report) slated for release on 21 January 2015 includes any major changes in inflation estimates.”
Key Quotes
“The content of the BOJ governor’s press conference suggested to us that the BOJ is unlikely to roll out further monetary easing measures in 2015 H1 in response to lower crude oil prices. Indeed, we maintain our view that the BOJ's next round of further monetary easing is likely to be in October 2015.”
“Nevertheless, we should probably keep in mind the risk of additional monetary easing measures in the first half of the year. If the price of North Sea Brent crude oil remains at around $60/barrel, core CPI inflation could well fall to around 0% in 2015 Q2. Given that the BOJ’s latest monetary policy statement stated that "the year-on-year rate of increase in the CPI is likely to be around the current level for the time being," we do not think the BOJ has factored in the possibility of inflation falling to almost 0%.”
“The BOJ is only too aware that a sharp fall in inflation could trigger a fall in inflation expectations, and we cannot therefore completely rule out the BOJ implementing additional monetary easing earlier than expected in the event that lower crude oil prices set in motion a sharp decline in inflation.”
“In that sense, we think that there will be keen interest in whether the BOJ's Interim Assessment of the Outlook for Economic Activity and Prices (Outlook Report) slated for release on 21 January 2015 includes any major changes in inflation estimates.”