Bank of Japan probably on hold until second half of 2014

The Bank of Japan’s decision to maintain the current pace of asset purchases after its Board meeting today was no surprise. Governor Kuroda emphasised the Bank’s willingness to ease further, but also that it is too early to conclude that the planned monetary expansion will be insufficient to hit the 2% inflation target. Our view is that the Bank is likely to wait until the second half of 2014, rather than to move sooner (as many others predict) to cushion the economy against the impact of next April’s consumption tax hike. But whatever the precise timing, we think the Bank has a lot more work to do.