Stay tuned for more easing from BoJ – MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Oct 27, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the latest reports suggest that the BoJ is likely to ease further in this week’s policy meet due to the global headwinds.

    Key Quotes

    “The yen has been little impact from an Asahi newspaper that the BoJ is considering further easing at their policy meeting later this week. The report states that an argument is circulating within the BoJ that extra easing would improve corporate sentiment and encourage companies to raise wages. However, the report also adds that some board members think that additional easing is unnecessary and that the situation is fluid.”

    “A Wall Street Journal report has stated as well that the BoJ is starting to pay closer attention to the risks of slowing global growth hampering their efforts to achieve its inflation goal and is keeping the door open to additional stimulus measures. Some in the central bank’s leadership are reportedly growing more concerned that if the problems in emerging economies become protracted or deepen further, that could affect business confidence in Japan and possibly make companies even more tight-fisted about capital investment and wage increases.”

    “Downside risks were reportedly described as no smaller than last year when the BoJ last eased policy. The report also cited unease over the recent pullback in corporate price expectations measured in the latest Tankan survey. Overall the reports are unlikely to be viewed as decisive signals as to whether the BoJ will ease policy later this week but do highlight that if downside risks to growth and inflation continue to build they will respond.”

    “The latest Bloomberg survey of economist expectations highlights that the BoJ decision is viewed as a close call leaving the yen more sensitive to the outcome. According to Bloomberg, sixteen out of 36 analysts surveyed expect the BoJ to ease policy later this week. A further eight see the BoJ delivering more easing by April of next year, and only twelve see no further easing in the foreseeable future.”

    “Our analysts in Tokyo continue to expect no easing this week, and view the April meeting as the most likely date for further easing if required. We would be surprised if the BoJ waited so long before easing policy if the Japanese economy continued to disappoint as it would likely be viewed as complacent raising the risk that inflation expectations will decline and the yen strengthens. The recent improvement in global investor risk sentiment has helped to dampen upside risks for the yen if the BoJ refrains from providing further easing later this week.”
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