The Bank of Japan will likely leave policy settings unchanged at the meeting that concludes on Friday (13th June). We continue to expect more easing in October as it becomes clear that inflation excluding the effects of the consumption tax hike will fall short of the 2% target at the end of the year. However, even if inflation remains higher for longer, supply-side reforms could still result in disinflationary pressure that will have to be offset by additional monetary stimulus.
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