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BOJ could bring in a surprise this week – Goldman Sachs

FXStreet (Mumbai) - In a recent note published by Goldman Sachs economists, the lead economist Naohiko Baba warned that the Bank of Japan (BOJ) could surprise markets by unveiling additional stimulus measures at its policy decision due tomorrow.

The central bank commenced its two-day meeting on Tuesday with the outcome due out on Wednesday at 03.30-04.30 GMT.

Key Quotes:

"We maintain our base-case for the BOJ to take additional easing action on October 30, although we do not fully rule out the possibility of an earlier move this week."

"We think Japan's economy can narrowly escape a technical recession, but the current state of the economy is far below the BOJ's outlook."

"Expected inflation rates, on which the BOJ place large importance as a QQE [quantitative and qualitative monetary easing] transmission channel, have been on a downtrend almost across the board with the corporate outlook in the Tankan Survey providing the latest clear evidence."

"Without additional easing at all in October, we believe Mr. Kuroda's commitment would be seen as wavering considerably, and this could prompt market volatility."

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