29 Apr 2015
Bank of Japan to announce more policy stimulus today - Capital Economics
FXStreet (Bali) - Capital Economics is in a very small majority of analysts expecting the Bank of Japan to announce more policy stimulus at today’s Board meeting later today.
Key Quotes
"We are in a very small majority of analysts expecting the Bank of Japan to announce more policy stimulus at today’s Board meeting (the statement is usually released around 04.00 BST, although there is no set time)."
"While Governor Kuroda provided no indications that additional easing was imminent at the first meeting earlier this month, he has a record of springing surprises."
"In the meantime, the economic recovery is anaemic and underlying inflation has remained weak. Indeed, headline inflation is set to plummet in April (as last year’s consumption tax hike drops out of the annual comparison) and it could even turn negative soon, dragging inflation expectations lower again."
"We therefore stick to our view that policymakers will signal their commitment to the 2% inflation target by announcing more stimulus this month. We have pencilled in an increase in the annual pace of JGB purchases from ¥80trn to ¥85trn and of equity ETFs from ¥3trn to ¥8trn."
What’s more, even if the BoJ does maintain its current policy settings today, the persistent threat of deflation, sluggish growth, and the dire state of the public finances should maintain the bias towards further easing for the foreseeable future. We would therefore continue to forecast renewed yen weakness and outperformance by Japanese equities. (Marcel Thieliant & Julian Jessop)
Key Quotes
"We are in a very small majority of analysts expecting the Bank of Japan to announce more policy stimulus at today’s Board meeting (the statement is usually released around 04.00 BST, although there is no set time)."
"While Governor Kuroda provided no indications that additional easing was imminent at the first meeting earlier this month, he has a record of springing surprises."
"In the meantime, the economic recovery is anaemic and underlying inflation has remained weak. Indeed, headline inflation is set to plummet in April (as last year’s consumption tax hike drops out of the annual comparison) and it could even turn negative soon, dragging inflation expectations lower again."
"We therefore stick to our view that policymakers will signal their commitment to the 2% inflation target by announcing more stimulus this month. We have pencilled in an increase in the annual pace of JGB purchases from ¥80trn to ¥85trn and of equity ETFs from ¥3trn to ¥8trn."
What’s more, even if the BoJ does maintain its current policy settings today, the persistent threat of deflation, sluggish growth, and the dire state of the public finances should maintain the bias towards further easing for the foreseeable future. We would therefore continue to forecast renewed yen weakness and outperformance by Japanese equities. (Marcel Thieliant & Julian Jessop)