Bank of Japan Preview: Forecast from seven major banks

The Bank of Japan will announce its latest decision on monetary policy this Thursday at 03:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of seven major banks. The BoJ is expected to maintain rates on hold at -0.1% while the focus will remain on the yield curve control, which aims to maintain the 10-year JGB yield target at around 0.00%.

Ahead of the event, the USD/JPY pair has been consolidating around the 104.00 figure in the last two weeks, retaining its long-term bearish potential, despite bouncing from a multi-month low of 102.60.

Danske Bank

“We do not expect any policy changes from the Bank of Japan despite a renewed state of emergency in half of the country. In December, funding measures were extended and a policy review was kicked off; the results of which will be released in March. Here the BoJ will look for ways to increase the sustainability of its policies without making it look like a retraction from current easing levels. A widening of the tolerance band could be one way to go along with adjusting its ETF purchases.”


“The worsening covid situation in Japan will no doubt be weighing on the BoJ minds, as will deflation (which may get worse when the December CPI figure is released on Friday).  No fresh easing is expected from the BoJ and instead, speculation is growing that the BoJ will scale back its ETF stock buying programme – given the strength in equities and the BoJ’s substantial ownership of this ETF sector.”

Deutsche Bank

“The BoJ will maintain their policy stance, but they’re likely to downgrade their economic outlook in light of the state of emergency declaration.”


“Media reports over the weekend suggest the BoJ may broaden the range for its YCC (yield curve control) at this week’s board meeting. BoJ currently sets the 10yr JGB yield target at 0%, while setting the policy rate at -0.1% and the JGB yields range at ±0.2%. Citi analysts however think it unlikely that the BoJ further widens the trading band of its 10yr JGB yield at this week’s meeting.”


“The BoJ meeting is not expected to provide any fireworks, with policy seen left on hold. As the upcoming CPI data will underscore, the BoJ is going backward in regard to its inflation target. The output gap has widened and inflation expectations are drifting lower. The Board would love to be able to flick a switch, spur activity and hopefully drive inflation higher. Alas, there are no easy options. The main focus will be on the Bank’s latest forecasts. The recent imposition of the state of emergency has seen private-sector GDP forecasts slide and we suspect that the BoJ will follow suit, lowering its FY20 projection. The direction of the FY21 projections is more nuanced with a weaker base effect likely offset by the fiscal stimulus that was passed in December.”

DBS Bank

“The BoJ policy meeting should deliver no major surprises tomorrow. Japanese media has speculated that the BOJ is contemplating widening the ±20 bps tolerance band around the 0% yield target (though the current band was not really tested last year).”


“Last month the BoJ launched another review of monetary policy, the results of which are expected in March. Speculation has been rising as to what changes this could bring. One impact is that this week’s regular policy meeting is unlikely to bring any fresh policy changes.”


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