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Increased expectations for BOJ easing - Nomura

FXStreet (Bali) - Expectations for near-term BOJ easing have increased, according to a Bloomberg survey, notes Nomura.

Key Quotes

"Expectations for near-term BOJ easing have increased, according to a Bloomberg survey. 17 out of 36 (47%) researchers now expect the Bank to ease in October, while last month only 37% of them expected BOJ easing by the end of October."

"Economic data released since the previous meeting have been disappointing, suggesting the Q3 recovery will be limited after negative growth in Q2. External factors, such as the FOMC’s decision to delay the lift-off in September and volatile financial markets, are also likely to increase market expectations for BOJ action."

"The BOJ Tankan survey and inflation expectations survey are neither weak nor strong enough to shift market expectations for BOJ easing significantly, and the fact that about 50% of the respondents expect easing in October is unsurprising."

"Market expectations for easing at this week’s meeting (6-7 October) are still relatively limited. Only two researchers (6%) expect the Bank to ease this week. Both of them expected an easing at the September meeting and thus, expectations for easing at this week’s meeting have not risen much, at least among researchers. JPY short positions have been also small."

"We do not expect the BOJ to ease this week, and a no change decision could put downside pressure on USD/JPY. At the same time, market expectations for BOJ easing will likely be sustained into the second meeting in October (30 October), as the BOJ almost certainly needs to lower its inflation and growth forecasts at that meeting."

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