BOJ retains massive stimulus program, accepts lower inflation outlook

March 17, 2015

The BoJ retained its plan to increase the monetary base by 80 trillion yen a year as expected. The bank also maintained its optimistic view on Japan’s economic recovery, but it lowered its inflation forecasts for the short-term. This acceptance of soft inflation for time being reduces the likelihood that the bank will introduce more stimulus in near-term.

The BoJ stated that “annual consumer inflation is seen moving around zero percent for the time being on declines in energy prices”, which is slightly less optimistic that the bank’s view last month that inflation will slow for now on the back of falling oil prices. Kuroda has warned that the bank will not act in response to these fluctuations in the inflation outlook in short-term, unless they change the long-term outlook for consumer prices.

From our BoJ preview:
There are two main reasons why the bank is content to leave policy untouched at the moment. Firstly, Kuroda told the world at the end of February that “the BoJ won’t respond to oil price moves themselves but will closely monitor how they affect inflation expectations”. This basically means that the bank won’t respond to short-term fluctuations in prices but will act if inflation expectations are materially weakened over the long-term. Secondly, the BoJ likely wants to see the results of this springs wage negotiations before committing to further easing.

The BoJ can afford to remain on the sidelines as long as it can argue that depressed inflation in Japan is due to oversupply in the oil market, as opposed to a lack of consumer and business confidence domestically. Also, the bank is confident that wages will begin to pick-up as the economy improves. However, we aren’t as convinced this will happen in the near-term and more support from the BoJ may be required (see: BoJ Preview: Hold!).

Market reaction
The yen strengthened slightly on the back of today’s policy meeting at the BoJ as the bank lowered its inflation forecast. The acceptance of soft-no inflation for the time being reduces the likelihood that the bank will respond to soft inflation numbers with further stimulus. In saying that, the bank can’t keep its head in the sand forever if the inflation outlook remains depressed. In light of today’s meeting, any USDJPY strength in the near-term may have to come from the USD side of equation – eyes on Wednesday’s FOMC meeting!

Publication source
FOREX.com information  FOREX.com reviews

January 23, 2017
Can Supreme Court Ruling Help GBPUSD Remain Bullish ?
Tomorrow, Tuesday 24 January, around 09:30 GMT, the UK Supreme Court will release the Brexit lawsuit Ruling, on whether the UK Prime Minister Theresa May will need the UK parliament’s approval to invoke Article 50 of the Lisbon Treaty, to leave the EU...
January 20, 2017
Cautious EURUSD Ahead of ECB Press Conference
USD, and the US government bond yields, surged last night following Fed president Janet Yellen’s speech to the Commonwealth Club in San Francisco...
January 19, 2017
Is equilibrium out of reach?
Let’s check what’s going on with Oil before turning our attention to the Russian Ruble. “Black gold” is forming a reversal pattern next to the key level of 52.10. The only matter is that this pattern is above the horizontal level, but the 52.10 level can potentially become the neckline of our pattern...

XM Rating
Fort Financial Services Rating
FXCM Rating
FxPro Rating
FBS Rating
Grand Capital Rating

UKoptions Rating
Empire Option Rating
Beeoptions Rating
EZTrader Rating
OptionBit Rating
OptionFair Rating