Bank of Japan Preview: Five major banks expectations

The Bank of Japan (BoJ) is likely to stand pat on its monetary policy settings when it concludes its two-day review meeting on Thursday and as we get closer to the release time, here are the expectations forecast by the economists and researchers of five major banks regarding the BoJ Monetary Policy Statement. Although the policy announcement may not be market-moving, investors will pay close attention to the Japanese central bank’s quarterly outlook report and future policy guidance.

Standard Chartered

“We expect the BoJ to keep the policy balance rate unchanged at -0.1% and the 10Y target yield at c.0%. We think there is limited room for the central bank to cut its base rate but expect it to continue to expand QE to pump in liquidity into the market. We expect the new government to continue with expansionary fiscal policy to support growth. We think the BoJ will ease monetary policy if fiscal policy requires further QE.”

ING

“Lots of Japanese activity releases will come as fresh inputs for the Bank of Japan policymakers deciding the policy on October 29, though none of these are likely to change the current policy stance.”

TDS

“The BoJ should be keeping its main policy tools unchanged and downgrade its inflation forecast. With another wave of COVID-19 cases surging across the world, the BoJ is likely to express a more cautious tone since its last meeting. The build in corporate profits prior to the pandemic is now eroding rather precipitously, which could prompt new avenues of BoJ support down the line.”

Deutsche Bank

“Our economists expect no policy stance change in light of the slow but steady economic recovery and stable exchange rate.”

Danske Bank

“We will likely see a cut in the BoJ's new forecasts for GDP and inflation. We do not expect any changes to the QQE with yield curve control policy, though.”