Board to wait to see impact of recent policy changes

The Bank of Japan’s Policy Board meeting next week is likely to be uneventful. The Board has eased monetary policy twice in three meetings over the last two months, and we see little justification for further easing next Tuesday. Most of the additional asset purchases announced since September will not take place until next year, and the new cheap loans facility introduced at the end of October will take time to have an effect. Although the economy is slipping into recession, monetary policy at the zero bound is poorly placed to respond to short-term changes in demand.