December's decision finely balanced

The decision at the Bank of Japan’s Policy Board meeting next week is likely to be finely balanced. There are several goods reasons to believe the Board will further extend monetary easing, and several strong reasons to think it won’t. On balance, we expect further easing in the next few weeks, but not next week. The wild card, particularly in the days following the Lower House election, is the degree of political pressure that will be exerted on the Board. Politicians have sought to divert attention from their own lack of ideas to put the economy on a stronger footing by chastising the Bank for its lack of monetary stimulus. This is likely to intensify as a new government seeks to assert its mandate. However, the Bank would have good reasons to push back, at least for a while, to assert its independence.