BoJ next week, what to expect? - BAML

By FXstreet.com | Updated July 30, 2014 AAA

FXStreet (Guatemala) - Analysts at Bank of America Merrill Lynch noted the conditions surrounding the forthcoming BoJ next week.

Key Quotes

"We expect the Bank of Japan Monetary Policy Board will vote to keep its monetary base expansion target and the quantitative and qualitative monetary easing framework through asset purchases at its meeting on 14-15 July."

"In recent public comments, BoJ Governor Haruhiko Kuroda (at the Keizai Doyukai on 23 June) and Deputy Governor Hiroshi Nakaso (at the Foreign Correspondents Club on 8 July) both noted that, despite clear adverse impacts due to the reaction to demand pushed forward ahead of the April sales tax hike, the effects have been within expectations overall and the production-income-spending virtuous cycle has not broken down. Their views appear to be based on improving consumption data and survey results (the BoJ Tankan survey and Economy Watchers Survey), as well as labor market data like unemployment, wages, and hiring."

"The Governor and Deputy Governor also both noted that, although the inflation rate is expected to slow to approximately 1% through the summer as the effects of JPY weakening and higher energy prices diminish, inflation is thereafter expected to pick up once again. This shows that, even as the upward pushes from the exchange rate and higher commodities prices wear off and the inflation rate temporarily slows, as long as wage and employment data continue to improve and inflation expectations are considered likely to keep rising, the BoJ plans to take a wait-and-see stance for some time."

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