UBS analyst team analyzed recent BoJ rhetoric ahead of the March meeting. According to them, it is clear to us that Kuroda is trying hard to improve the public’s perception of policy in light of the decline in the USD/JPY and the Japanese stock market following the BoJ’s January meeting. Key Quotes “In a speech ahead of the Bank of Japan's (BoJ) policy meeting next week, Governor Haruhiko Kuroda yesterday emphasized that negative interest rates benefit individuals and businesses, and pointed out that the decline in lending rates is larger than the decline in savings deposit rates. Kuroda attributed the recent stock market volatility and yen strength to global risk aversion, rather than the central bank's negative rate policy.” “It is clear to us that Kuroda is trying hard to improve the public’s perception of the policy in light of the decline in the USD/JPY and the Japanese stock market following the BoJ’s January meeting. Before this is achieved, the central bank might refrain from further lowering the negative rates in March and instead choose to undertake the "qualitative" and "quantitative" aspects of its monetary easing program by buying risky assets and/or increasing the pace of its monetary base expansion.” “Alternatively, the BoJ might also decide to hold off on further easing until 2Q16, after one of its hawkish board members, Sayuri Shirai, is replaced by a dovish one, Makoto Sakurai, at the end of this month. If the BoJ defers further easing toward the second quarter, a short-term negative reaction on the USD/JPY cannot be ruled out.” “However, with inflation drifting further below the BoJ's target, and with Japan’s Upper House elections approaching in July, we would expect Prime Minister Shinzo Abe to accelerate his reflationary efforts in the new financial year starting in April, using a combination of fiscal and monetary stimulus. These dynamics should underpin a recovery of the USD/JPY toward our target of 120 over the next three months.” For more information, read our latest forex news.