At its upcoming meeting, the Bank of Japan is set to slash its inflation forecasts for the coming fiscal year and may push also back the timeframe for hitting the 2% inflation target yet again. While the failure to hit the target can be blamed in part on the stronger yen, domestic price pressures have weakened as well recently. We forecast a cut in the policy rate to -0.2% this week followed by further cuts in the first half of next year.
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