Forex Flash: BoJ tops priority list – BBH

FXstreet.com (Barcelona) - Brown Brothers Harriman analysts see tonight's BoJ meeting conclusion as the most hotly anticipated event of the week.

They comment that the pressure on the BoJ from the new Abe government is widely recognized and with its recent economic assessment in which most regions were downgraded, the BoJ cannot be content either. There is therefore, little doubt that the Bank will take action.

However, they feel that the impact of some of the measures that have been discussed, such as open ended QE or a 2% inflation goal, is questionable. They ask, "What does open-ended QE mean when the BOJ has repeatedly increased the amount of assets it is buying? How is a 2% inflation goal credible when it has failed to achieve its 1% goal?"

Similarly, a cut in the interest paid on reserves is possible, but it is not clear how that would be inflationary or stimulative. They write, "Our fundamental and technical analysis warns that the market is vulnerable to disappointment or a "sell the rumour buy the fact" type of activity. There has been some position adjustment today as the dollar still has not been able to sustain a move above JPY90. In terms of intent, the imagery we still think apropos is blowing (hot) air underneath the (yen's) parachute to increase the likelihood of a soft landing and reduce the antagonism that its strategy engenders."