21 Nov 2013
Flash: BOJ's decision today to have little impact on Yen - Nomura
FXstreet.com (Barcelona) - The BOJ is likely keep its policy unchanged today, notes Yujiro Goto, FX Strategist at Nomura.
Key Quotes
"While Q3 growth has slowed from the first half of this year, the Bank is likely to remain optimistic on the economic outlook. The Bank just released its semi-annual outlook report on 31 October, in which it expects 2.7% growth for FY2013. While the FY2013 growth forecast is now at the same level as consensus expectations, the Bank still sees higher growth for FY2014 (+1.5%) and FY2015 (1.5%)."
"The Bank also forecast inflation to reach 1.9% in FY2015, much more optimistic than private forecasters. It is quite unlikely that the BOJ will consider further easing at this point, just after one weak data point. Recent rises in the Nikkei and USDJPY also reduce the likelihood of a near-term easing."
"Japanese inflation has been improving, while inflation pressures are decreasing in the major advanced economies. In fact, Japanese headline CPI inflation is now higher than the eurozone's CPI inflation and US PCE inflation, while the core measure of Japan still lags behind the eurozone and US."
"JPY has been trading almost flat in the past six months, and the gradual rise in Japanese inflation suggests higher inflation expectations have been gradually influencing Japanese inflation dynamics positively. At the same time, weakening inflationary pressures outside Japan pose a higher risk for the BOJ failing to achieve the inflation target in the medium term."
"Further easing is still likely next year, especially after the scheduled tax hike next April. Easing expectations for the meeting this week should be limited. It has become clearer that the end-2013 target of ETF and REIT holdings are not strict maximums, as the BOJ already has more REITs than the end-2013 target."
"The BOJ can purchase ETFs when necessary, even if the outstanding exceeds the end-2013 target, without making policy changes. Thus, expectations for a BOJ easing are also likely to be smaller in the equity market. As a result, the impact of the BOJ's decision this week on FX will likely be small."
Key Quotes
"While Q3 growth has slowed from the first half of this year, the Bank is likely to remain optimistic on the economic outlook. The Bank just released its semi-annual outlook report on 31 October, in which it expects 2.7% growth for FY2013. While the FY2013 growth forecast is now at the same level as consensus expectations, the Bank still sees higher growth for FY2014 (+1.5%) and FY2015 (1.5%)."
"The Bank also forecast inflation to reach 1.9% in FY2015, much more optimistic than private forecasters. It is quite unlikely that the BOJ will consider further easing at this point, just after one weak data point. Recent rises in the Nikkei and USDJPY also reduce the likelihood of a near-term easing."
"Japanese inflation has been improving, while inflation pressures are decreasing in the major advanced economies. In fact, Japanese headline CPI inflation is now higher than the eurozone's CPI inflation and US PCE inflation, while the core measure of Japan still lags behind the eurozone and US."
"JPY has been trading almost flat in the past six months, and the gradual rise in Japanese inflation suggests higher inflation expectations have been gradually influencing Japanese inflation dynamics positively. At the same time, weakening inflationary pressures outside Japan pose a higher risk for the BOJ failing to achieve the inflation target in the medium term."
"Further easing is still likely next year, especially after the scheduled tax hike next April. Easing expectations for the meeting this week should be limited. It has become clearer that the end-2013 target of ETF and REIT holdings are not strict maximums, as the BOJ already has more REITs than the end-2013 target."
"The BOJ can purchase ETFs when necessary, even if the outstanding exceeds the end-2013 target, without making policy changes. Thus, expectations for a BOJ easing are also likely to be smaller in the equity market. As a result, the impact of the BOJ's decision this week on FX will likely be small."