BOJ to announce further easing in July - Nomura

Nomura expects the BOJ to announce further easing measures in July, including a 10bp rate cut, a negative interest rate on its loan support operations and increases of JPY3trn and JPY90bn in its purchases of ETFs and REITS.

Key Quotes

"While the BOJ disappointed the market in April, expectations for additional easing by the BOJ remain high. 31% of BOJ watchers expect the next BOJ easing to be in June, while 79% expect a BOJ easing by July, according to JCER (Figure 5). Our client survey ahead of the April meeting showed that ETF purchases and a negative rate loan support programme were the likely policy options of the BOJ."

"Our economists expect the BOJ to announce 1) a 10bp rate cut, 2) a negative interest rate on its loan support operations, and 3) increases of JPY3trn and JPY90bn in its purchases of ETFs and REITS, in July. The announcement of this policy package in July may not be a big surprise to the market, because of elevated market expectations, while an earlier announcement in June will be viewed as more USD/JPY positive. Although market expectations for a BOJ easing are high, FX market reactions to the article on the negative rate loan support programme ahead of the April meeting suggest USD/JPY is still likely to react positively to any BOJ easing decision, at least in the short term."