30 Apr 2015
BOJ tweaks its view on reaching its inflation target – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, comments on today’s BoJ’s action to lower its GDP and inflation forecasts.
Key Quotes
“The BOJ as expected left its monetary policy stance unchanged today and has just released its semi-annual report on the outlook for the economy and inflation. Again, as expected, the BOJ cut its core CPI forecast for the current fiscal year from 1.0% to 0.8% while the FY16 projection was cut from 2.2% to 2.0% and the first stab at FY2017 was put at 1.9%.”
“Real GDP for the current year was cut from 2.1% to 2.0% and from 1.6% to 1.5% next fiscal year. The first GDP projection for FY2017 was a measly 0.2% reflecting the impact of the second sales tax increase from 8% to 10% planned for April 2017.”
“There has been a little pull-back in the wording on reaching the 2.0% target. Whereas before the communication suggested the end of this fiscal year, the BOJ is now stating the first half of FY2016. Given energy is included in the BOJ target rate, the developments in crude oil markets will prove important.”
“There are two ways one could look at the outlook for inflation and BOJ monetary policy. One is that the BOJ is now projecting two years of inflation at the target rate – FY2016 & 2017 and if inflation drifts higher through the remainder of this year and into 2016 then Governor Kuroda’s optimism will be justified and the need for additional easing will not be there – indeed the focus could quickly shift to when tapering of QQE might begin.”
“The other way is that today’s downward revision to FY2015 inflation confirms that to date QQE is not achieving its purpose. The first easing came in April 2013 and back then Governor Kuroda stated the 2.0% goal would be reached in two years – that has not happened.”
Key Quotes
“The BOJ as expected left its monetary policy stance unchanged today and has just released its semi-annual report on the outlook for the economy and inflation. Again, as expected, the BOJ cut its core CPI forecast for the current fiscal year from 1.0% to 0.8% while the FY16 projection was cut from 2.2% to 2.0% and the first stab at FY2017 was put at 1.9%.”
“Real GDP for the current year was cut from 2.1% to 2.0% and from 1.6% to 1.5% next fiscal year. The first GDP projection for FY2017 was a measly 0.2% reflecting the impact of the second sales tax increase from 8% to 10% planned for April 2017.”
“There has been a little pull-back in the wording on reaching the 2.0% target. Whereas before the communication suggested the end of this fiscal year, the BOJ is now stating the first half of FY2016. Given energy is included in the BOJ target rate, the developments in crude oil markets will prove important.”
“There are two ways one could look at the outlook for inflation and BOJ monetary policy. One is that the BOJ is now projecting two years of inflation at the target rate – FY2016 & 2017 and if inflation drifts higher through the remainder of this year and into 2016 then Governor Kuroda’s optimism will be justified and the need for additional easing will not be there – indeed the focus could quickly shift to when tapering of QQE might begin.”
“The other way is that today’s downward revision to FY2015 inflation confirms that to date QQE is not achieving its purpose. The first easing came in April 2013 and back then Governor Kuroda stated the 2.0% goal would be reached in two years – that has not happened.”