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BoJ Preview: Status quo this time, closer call on 30th Oct – BAML

FXStreet (Delhi) – Masayuki Kichikawa, Research Analyst at BAML, suggests that the forthcoming BoJ is likely to maintain its status quo in the forthcoming monetary policy decision but the decision on 30th Oct is going to be closer call which will be dependent on data and market trends.

Key Quotes

“The BoJ will hold a Monetary Policy Meeting (MPM) on 6-7 October. We believe the central bank is likely to maintain the current pace of monetary easing because (1) it is due to revise its economic and inflation forecasts at the subsequent MPM in about three weeks' time (30 October) alongside its Outlook Report; and (2) we do not think current share prices and the yen exchange rate have reached levelsthatrequire urgent monetary easing.”

“If the BoJ stays on hold this time, the impact on financial markets should be limited as expectations for easing will remain. Further easing can include more purchases of JGBs, (new) risk assets and the extension of JGB maturities, but no IOER cut.”

“However, the question of whether the BoJ will act to ease in the near future (30 October, or at the subsequent few MPMs) has become a closer call, since financial and currency markets have remained unstable since August, on top of which some economic data are coming in below expectations.”

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