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Bank of Japan Watch

Bank has breathing room to reconsider tolerance band

The Bank of Japan will signal prolonged loose policy by forecasting below-target inflation over the next couple of years in next week’s “Outlook” report. Meanwhile, the fall in global bond yields in recent weeks provides a window in which the tolerance band around the 10-year yield target could be widened.

14 July 2022

Bank of Japan Watch

Weak wage growth to preclude tighter policy

While Japanese inflation will stay just above the Bank of Japan’s 2% target over the coming months, the Bank will not tighten policy at either the short or long end of the yield curve while wage growth and domestic demand remain weak.

10 June 2022

Bank of Japan Watch

Policy settings under threat but BoJ won’t yield

Despite coming under significant pressure in both bond and currency markets in recent weeks, the Bank of Japan will not respond to inflation reaching its 2% target by hiking its short-term policy rate, nor by letting go of 10-year JGB yields.

21 April 2022

Bank of Japan Watch

2% inflation wouldn’t be enough for rate hike

While the war in Ukraine will lift Japanese inflation to the Bank of Japan’s 2% target, continued weakness in wage pressures and underlying inflation mean that the Bank won’t respond with a rate hike. And while Governor Kuroda’s successor may be more hawkish, we don’t foresee tightening next year either.

10 March 2022

Bank of Japan Watch

Shrinking balance sheet won’t lead to tighter policy

While Omicron is likely to intensify input price pressures, most Japanese firms will continue to absorb those costs in their margins, ensuring inflation stays well below the Bank’s 2% target. And in contrast to the Fed, a gradual shrinking of the BoJ’s balance sheet won’t lift long-term yields in Japan. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

12 January 2022

Bank of Japan Watch

BoJ to extend Covid aid, won’t lose control of yields

While renewed virus restrictions are unlikely to be deflationary, we think Omicron fears will prompt the Bank of Japan to err on the side of caution and extend its emergency corporate funding measures to the end of September. Meanwhile, we disagree with the argument that 10-year JGB yields may spike past +0.25% if inflation surprises to the upside.

9 December 2021

Bank of Japan Watch

Bank to look through weaker yen and supply shortages

Sitting comfortably with continuity candidate PM Kishida in charge, the Bank of Japan won’t alter its major policy settings at its October meeting. And we doubt the Bank will respond with policy tweaks to the recent weakening in the yen, nor to continued supply chain disruptions.

21 October 2021

Bank of Japan Watch

PM frontrunner Kono may favour sharper taper

Dug in for an extended hold, the Bank of Japan won’t alter its major policy settings at its September meeting. Further ahead though, PM Suga’s successor – to be elected in two weeks’ time – may look towards prodding the Bank into shrinking its balance sheet.

16 September 2021

Bank of Japan Watch

New climate change facility not a game changer

At its July meeting we expect the Bank of Japan to outline that it will offer interest-free loans to banks under its new fund-provisioning measures aimed at addressing climate change. Beyond that though, the Bank won’t alter its major policy settings.

9 July 2021

Bank of Japan Watch

Asset purchases to remain low but rates on hold

At its June meeting we think the Bank of Japan may extend the deadline on its emergency lending facility from September to December. Beyond that point, it should further taper its purchases of short-dated debt as it digs in for a prolonged hold.

11 June 2021

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