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BoJ: New Year brings new changes - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 7, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – James Smith, Economist at ING, suggests that the way that the BoJ operates is set to change in a number of ways this month, starting this week with the release of a new “summary of opinions” relating to the December meeting.

    Key Quotes

    “A string of measures designed to improve the effectiveness of the BoJ’s communication will be implemented this month (announced last year). The most obvious difference is that the number of monetary policy meetings will reduce significantly from 14 to 8, bringing them in line with the Fed, as well as the ECB and Bank of England – both of which have made similar changes in the past year. The new schedule closely mirrors that of the Fed (often the meeting dates overlap in 2016) and will end the arrangement which occasionally placed two BoJ meetings within the same month.

    However, the biggest changes relate to how the bank communicates with the markets. Firstly, the semi-annual Outlook report will now be released on a quarterly basis (January, April, July, October). This means the two-tier nature of the BoJ’s previous meeting cycle where the April/October meetings received great attention whilst others were virtually “written off” will become much less pronounced. Interestingly, these reports will also contain diagrams featuring the expected paths of CPI and GDP of each individual policy member.

    On a similar note, the change with perhaps the biggest market relevance could be the introduction of a “summary of opinions”. Until now, analysts have had to rely on minutes published around a month after each meeting to try and gauge the opinion of individual board members, which often contained only limited information about the differing views held. However, this new publication will be released much earlier (around one week after each meeting) and is expected to detail more explicitly the range of opinions held by different committee members on a variety of topics. Naturally, any changes to the opinions held on inflation will probably be most heavily scrutinised, particularly given our expectation that inflation will again undershoot the BoJ’s 2% target this year.

    The first of these publications will be released this Friday, 8 January and will relate to the BoJ’s December meeting where it made some technical tweaks to QQE. In our opinion they were implemented to extend the lifetime of the policy and is perhaps the first unofficial acknowledgement that technical limits do exist. This month’s publication will be particularly interesting, given that the decision to make these changes to QQE was by no means unanimous (vote was 6-3), so the summary of opinions could provide more colour on the competing views on this topic within the committee.”
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