Following the Bank of Japan (BoJ) policy meeting this week, Barclays now believes that further easing by the BoJ is unlikely for some time.
"That said, we still believe CPI inflation is unlikely to reach the BoJ’s 2% price stability target “around H1 FY16,” the horizon indicated in its semi-annual Outlook Report released on 30 April.
In this light, Barclays retains its view that the BoJ will ease further, but now believe such a move will come in April 2016 (with a risk of an earlier move in January) versus its previous forecast of July 2015.
"We believe any increase in base pay at the 2016 “shunto” spring wage negotiations is likely to be much smaller than 2%. Those results should be broadly apparent in April 2016, providing a logical time for the BoJ to ease further," Barclays argues.
"That said, we continue to see a risk of an earlier move given BoJ Governor Kuroda’s stance of taking action “without hesitation” if needed," Barclays adds.
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