BOJ: Market will continue to see bias toward easing – BofA

By FXStreet FXStreet (Bali) – Masayuki Kichikawa and Setsuko Yamashita, Economists at BofA Merrill, think Japan is unlikely to approach the 2% inflation target until 2017, concluding that the market will continue to see a bias toward easing by the BOJ.

Key Quotes

“In light of recent downward revisions to our forecasts for US and Chinese economic growth and lingering high saving rates, we have lowered our growth forecasts for the Japanese economy in 2015–16.”

“Nonetheless, we continue to expect the Japanese economy to remain on a recovery track, with support coming from four areas: (1) structural improvement in corporate earnings power, (2) improvement in business conditions in 2016 on more favorable terms of trade, (3) continued tightness in the labor market as growth of the service sector supports the uptrend in the numbers of employed workers, and (4) the strong likelihood that the Abe government will implement another stimulus package. Under those conditions, the inflation rate is also likely to improve to the mid-1% level in 2016.”

“If our forecast proves correct, it will be a major achievement for Japan. However, the plummet in commodity prices complicates the achievement of 2% inflation growth, not just for the BoJ, but also for the FRB …read more

Source:: FX Street