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How important is the exchange rate for inflation?

The latest data still show a sluggish recovery, but recent BoJ communication remains upbeat. The upcoming meeting is therefore unlikely to result in any changes to policy or tone. Instead, we think policymakers will wait until the late-October meeting to adjust their GDP forecasts and announce an extension of QQE into next year. We still expect a more aggressive pace of purchases to  be introduced, but not until 2015.

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