BoJ will remain on-hold the rest of the year – Danske Bank

FXStreet (Edinburgh) - The research team at the Nordic Danske Bank expects the Bank of Japan to keep its gunpowder dry throughout the rest of the present year.

Key Quotes

“We no longer expect Bank of Japan to ease this year”.

“First, there just has not been enough movement in BoJ’s communication in a more dovish direction in the past month”.

“Second, the recent sharp depreciation has also taken considerable pressure off BoJ for more easing”.

“Third, it now appears that fiscal policy will be tightened less than expected”.

“Fourth, there is increasing focus on the costs from BoJ’s aggressive bond purchases with particular attention on BoJ possibly destroying the liquidity in the bond market”.

“Our call for a weaker JPY is not dependent on additional easing from BoJ. (1) Any additional easing will only be marginal compared with the aggressive monetary easing BoJ is already doing. (2) Public pension funds in Japan are expected to shift their portfolios towards a larger share of foreign securities. (3) The Fed will gradually start to normalise monetary policy”.