BOJ Review: Waiting longer for tailwinds - Nomura

The BOJ left its policy unchanged as widely expected and again pushed back the expected timing for reaching its inflation goal to around FY2019, while downgrading its inflation forecast broadly from FY2017 to FY2019, noes he analysis team at Nomura.

Key Quotes

“The less optimistic inflation forecast should not lead to immediate policy action, but the BOJ needs to keep its current policy framework unchanged for longer as inflation momentum disappoints. BOJ policy normalisation is still a way off, while foreign central banks are embarking on normalisation. Immediate JPY reactions were muted. However, into September when the Fed and ECB are expected to communicate the adjustment of their balance sheets, the BOJ’s unaltered dovish stance should gradually support cross yens. Even if foreign yields rise as central banks turn less dovish, the Bank’s commitment to its yield curve control will stay unchanged for now, widening rate differentials.”