BoJ stood pat and shaved its inflation forecasts - BBH

Analysts at BBH explain that as widely anticipated, the Bank of Japan stood pat and shaved its inflation forecasts while this fiscal year's inflation forecast was cut to 1.1% from 1.4%.  

Key Quotes

“It pushed out for another year, now around FY19, when the 2.0% core inflation (excluding fresh food) is approached.  This signals a BOJ that remains committed to its unorthodox stance.  Despite coming under pressure from some in the Diet, the BOJ is not talking about exit or tapering.”

“The BOJ also tweaked its growth forecasts.  The economy is expected to expand by 1.8% this fiscal year compared with 1.6%, while FY18 GDP is forecast at 1.4% up from 1.3%.  FY19 GDP is expected to slow to 0.7% (unchanged forecast) as it includes the expected sales tax increase.”

“Separately, Japan reported that its trade balance swung back into surplus in June after a deficit in May.  Exports rose 9.7% year-over-year while imports rose 15.5%.  Both were stronger than expected, though the resulting trade surplus was a little smaller than forecast.  Stronger foreign demand is helping spur domestic activity, especially machine orders, industrial production, and capex.  Japan's exports to China, its largest trading partner are up 19.5% year-over-year.  Exports to the EU are up 9.6%, while exports to the US have risen 7.1%.”