Easing bias in place for the foreseeable future

The Bank of Japan’s Policy Board meets on Thursday and will almost certainly forecast that inflation will remain well below the new informal target of 1% until at least 2012. This does not necessarily mean, as many will assume, that there are no circumstances under which interest rates could be raised from near-zero over this period, or other forms of policy stimulus withdrawn. But in our view, monetary policy will have to remain ultra-loose for the foreseeable future.