BOJ’s exit from unprecedented monetary easing is now looking more remote – Goldman Sachs

Goldman Sachs’ Analysts out with their afterthoughts on Thursday’s BOJ policy announcement and Governor Kuroda remarks during the press conference.

Key Quotes:

“The BOJ was more bearish in its inflation outlook than we had expected, and our impression is that an exit from unprecedented monetary easing is now looking more remote

We continue to forecast that the BOJ will not implement additional easing, in the absence of sharp yen appreciation or other major shocks, no matter how difficult it is to achieve its 2% inflation target

We think the BOJ will continue with its yield curve control, and its policy of purchasing of ETFs and other risk assets, until it has confirmed that the various CPI inflation rates have stabilized at around 1% or higher

We also think the BOJ will continue to adopt a wait-and-see approach for now on expectations that rates will rise in the US

We think it will hold steady its purchase guideline for JGBs (of increasing its holdings at a pace of about ¥80 tn a year), which we believe has lost much of its significance, for the time being in order to prevent potentially undesirable developments, particularly in the currency markets (i.e., yen appreciation)

At the press conference, Governor Kuroda clearly denied the possibility of changing the 2% target itself and the need for a new "comprehensive assessment" to reconsider the cost-benefit of the current policy framework.

Accordingly, we think that the BOJ will maintain its current monetary policy framework at least through Governor Kuroda's remaining time in office (until April 2018), in line with our base-case view. In the meantime, we think there are highly unlikely to be any significant communications on an exit strategy.“