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JPY: No imminent signal of easing from BoJ – MUFG

FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, suggests that BoJ has failed to provide markets with any hints of imminent easing as it left its monetary policy stance unchanged and remains committed to increasing the monetary base at an annual pace of about JPY80 trillion.

Key Quotes

“The BoJ’s assessment of the Japanese economy was also left largely unchanged in the accompanying policy statement. Japan’s economy was described as continuing to recover moderately, although exports and production have been affected by the slowdown in emerging economies. The BoJ expects the economy to continue recovering moderately as well.”

“The main change to the statement was the description that “business sentiment has generally stayed at a favourable level, although somewhat cautious developments have been observed in some areas”. The BoJ does not appear to be overly concern by the increased risk that Japan’s economy may have entered technical recession in the third quarter.”

“It provided no clear signal that the BoJ is moving closer to easing monetary policy. However, it does not entirely rule out that BoJ may ease policy at their next meeting at the end of October when their semi-annual economic outlook is updated. The policy statement from early October of last year also provided no clear signal before the BoJ eased policy further at the end of that month.”

“In the accompanying press conference, BoJ Governor Kuroda maintained his optimistic stance reiterating that the underlying inflation trend is continuing to steadily improve as evident by the annual rate of inflation excluding energy and fresh foods which he cited was already running above 1%. Household price expectations were also described as not having changed at all.”

“Overall, the accompanying policy statement and comments from Governor Kuroda provided no clear signal that further easing was imminent which should allow the yen to trade on a firmer footing in the near-term. However, if incoming economic data from Japan continues to disappoint it will heighten pressure on the BoJ to deliver further easing especially if the government does not implement fiscal stimulus.”

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