BoJ likely to resist pressure and keep policy on hold this month – ING

By FXStreet FXStreet (Delhi) – James Smith, Economist at ING, suggests that BoJ is likely to resist pressure and keep policy on hold at both its meeting this week and on 30 October.

Key Quotes

“With inflation looking increasing unlikely to reach 2% by the first half of next year, and recent data coming in below consensus, market expectations for further BoJ easing have continued to build. Whilst very few people expect fresh stimulus this week, most of the focus has been on the BoJ’s 30 October meeting, which is when it boosted QQE last year.”

“We believe that the economic outlook, whilst not exactly rosy, is better than the headlines would suggest. There is the possibility that the BoJ could increase purchases of other assets, for example local government bonds or riskier assets. However, compared to government bonds, the market for these assets is relatively small and an expansion in this area would not be particularly bold.”

“Ultimately, tapering of QQE is the most likely next step, although the BoJ may have to look at new tools if it wants to maintain stimulus next year. Having said all this however, it seems unlikely that expectations for further stimulus will dissipate substantially before the 30 …read more

Source:: FX Street