Bank of Japan likely to keep its inflation target

With even some members of the Bank of Japan’s Policy Board expecting inflation to remain well below the 2% target in FY 2015, there is growing speculation about how and when the Board will respond to any shortfall. Our view is that the Board is likely to keep the 2% target, while acknowledging that it may take at least a year longer to hit than originally anticipated. This tweak would probably take place in October 2014 and be accompanied by a further loosening in monetary policy.