Bank of Japan to maintain policy unchanged - Danske Bank

Analysts from Danske Bank, expect the Bank of Japan to keep its policy unchanged for the next 12 months if Koruda is re-appointed. 

Key Quotes: 

“We expect the Bank of Japan (BoJ) to maintain its ‘QQE with yield curve control’ policy unchanged at its monetary policy meeting ending on 21 September. It is widely expected that the BoJ will keep its monetary policy unchanged and that the announcement should not have any significant impact on price actions.”

“The Japanese economy is currently running on all engines, and GDP growth picked up speed in Q2 with at annualised growth of 2.5%. CPI inflation has also been increasing through 2017, but it has mainly been due to rising energy prices. Hence, the underlying price pressure in Japan remains very low, despite solid growth and a closed output gap, and the BoJ’s 2% inflation target is currently nowhere within reach.”

“In terms of the BoJ, the focus will gradually turn to the question of who will be the next BoJ governor as Koruda’s term as BoJ governor expires in April 2018. The decision about the next BoJ governor is expected by end-2017 and we still think it is most likely that Koruda will be reappointed. But uncertainty could create some volatility and induce JPY appreciation pressure, as the nomination of another candidate could be viewed as a signal that the government is expecting the BoJ to exit its current monetary policy.”