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BoJ shrugs off recent string of weak data - BNP Paribas

FXStreet (Łódź) - BNP Paribas economist Raymond Van der Putten remarks that the BoJ left policy unchanged at today's meeting and suggested that recent unsatisfactory economic releases were due to the lasting impact of the April sales tax hike as well as effects of bad weather.

Key quotes


"In the statement issued after the meeting, the Policy Board noted that some weakness was observed on the production side. This was in reaction to the weak September Tankan, which showed that overall business conditions had weakened compared to the previous survey."

"The Board also noted that industrial production was showing some weakness, due in part to inventory adjustments. Nevertheless, it maintained, as in previous statements, that the economy had continued to recover moderately as a trend, and that this trend should continue in the coming quarters."

"On prices, the Policy Board noted that inflation, excluding the effects of the VAT hike, had been around 1.25% and would remain at that level for some time. It agreed that inflation expectations had been on an upward trend."

"However, a suggestion by Ms. Shirai to note that an increasing number of indicators for price expectations had been more or less flat recently was rejected. This was probably done for political reasons, as it would have suggested that the BoJ could soon adopt more easing measures."

"The Policy Board is probably right to shrug off the recent string of weak data, which are indeed related to the bad weather and a more prolonged than previously expected impact of the VAT rise. Moreover, the Board is worried to step up QQE, as it is unclear how to exit the policy at one stage without causing severe stress on government finances and Japan’s financial system."

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