The Bank of Japan’s decision to leave policy on hold today was widely expected in the light of the leadership changes due later this month. Two Board members did propose tweaks to the framework which might find more favour once the new Governor-in-waiting, Haruhiko Kuroda, takes over, although neither is the sort of “game changer” that many are hoping for. In our view, it is a near certainty that policy will be eased further in April, probably by increasing the size and lengthening the maturity of JGB purchases. However, this much is now surely priced in and the likely rejection of more radical options is setting up the markets for some major disappointment.
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