Expect more BOJ easing in Jan, yen to depreciate further – Citi

By FXStreet FXStreet (Mumbai) – Contrary to Goldman Sach’s view that the Bank of Japan (BOJ) may push back easing to April 2016, Citi Japan economists expect the central bank to add further monetary stimulus at the January meeting.

Key Quotes:

BoJ to implement further easing given the current stagnant state of the Japanese economy and inflation
The government will enact the supplementary budget immediately after the regular Diet session starts on Jan 4

We believe the Jan 28/29 meeting of the Monetary Policy Board will be the best timing for the BoJ to take an action. This would be the last chance for the bank to influence wage negotiations held between Feb and Mar.

Additional easing to consist of a JPY 1tn per month increase in JGB purchases and a JPY 2tn per year increase in ETF investments

Citi’s outlook on yen

Leading politicians like Prime Minister Abe or Chief Cabinet Secretary Suga are now distancing themselves from JPY depreciation, as it is associated with real wage losses from imported inflation

A rise in USDJPY much beyond 125 before next July’s Upper House election would even become a political problem

If USDJPY goes well beyond 125 before the Jan 28/29 meeting, the BoJ may choose ETF purchases only

We don’t yet …read more

Source:: FX Street