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BOJ expected to begin tapering QE from Oct 2016 - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 12, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Bali) - According to the Japanese Economics Team at Nomura, the BOJ is expected to begin tapering its JGB purchases from October 2016.

    Key Quotes

    "Inflation: Core CPI inflation stayed at -0.1% y-o-y in September. We believe it will be 0% y-o-y in Q4 on lower energy prices before it starts to rise from Q1 2016. We expect core CPI inflation to average 0.5% in 2015 and 0.7% in 2016."

    "Discussions over the FY15 supplementary budget have been intensifying with JPY3trn widely expected. However, as Q3 growth is likely to be negative again, we expect the budget’s size to rise further to possibly JPY5trn, out of which we expect JPY1.5trn public works spending to be disbursed through the budget."

    "A monumental broad agreement on the TPP (Trans-Pacific Partnership) should have positive effects in the medium term. On monetary policy, the Bank of Japan did not ease in October as we had expected. We continue to forecast policy easing in April 2016."

    "We also continue to expect the BOJ to begin tapering its JGB purchases from October 2016 when JGB scarcity problems are likely to arise. In the medium term, we expect the BOJ to adopt a de facto yield-curve targeting monetary policy regime."

    "Risks: External risks include an economic slowdown in China, the potentially negative impact of a rate hike in the US on the emerging economies– either of which could hurt the economy via increased volatility, a stronger JPY and a fall in Japanese equity prices."
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