Lower energy prices another reason to ease more

Just a few months ago, a sizeable number of analysts were expecting the Bank of Japan to provide more stimulus at the upcoming meeting, but only a few are still holding on to that view. We expect that the Bank will merely confirm at this week’s meeting that QQE will be extended in its current form for at least another year. But that does not mean that further easing is off the table. The economic recovery remains sluggish, and price pressure has moderated. What’s more, the recent plunge in crude oil prices provides yet another reason to increase the pace of asset purchases. We still think that this will happen in April, but an earlier announcement in January is certainly possible.