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BoJ unlikely to accelerate monetary easing this week - BTMU

FXStreet (Łódź) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ comments on the BoJ monetary policy meeting, which takes place this Friday and isn't expected to bring accelerated asset purchases.

Key Quotes

"The BoJ will also hold a monetary policy meeting at the end of this week alongside which they will release their latest outlook report for economic activity and prices. We do not expect the BoJ to announce an accelerated pace of monetary easing despite the disappointing performance of the Japanese economy since the implementation of the sales tax hike in April."

"There was some encouraging news overnight as it was revealed that retail sales expanded strongly for the second consecutive month by 2.7% in September providing evidence that the negative impact from the sales tax hike continues to fade. The sharp decline in the price of crude oil has also increased downside risks to the outlook for inflation in the near-term."

"BoJ Governor Kuroda continued to strike an optimistic tone overnight before the Committee on Financial Affairs reiterating that monetary easing has been exerting its intended effects, and that the Japanese economy remains on a path suggesting that their 2% inflation target will be achieved as expected. Deputy Governor Kikuo Iwata also spoke overnight stating that the time frame to achieve their 2.0% inflation target is not as rigid as a 'train schedule'."

"The comments suggest that the BoJ remains reluctant to accelerate asset purchases in the near-term. The BoJ’s updated inflation forecasts are likely to signal that they still expect the annual rate of core inflation excluding the impact of the sales tax hike to accelerate towards their 2.0% target in the next fiscal year. In these circumstances, accelerated BoJ monetary easing is unlikely to provide a trigger for further yen weakness in the near-term."

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