Bank of Japan to maintain status-quo on Friday - Nomura

In the view of analysts at Nomura, the Bank of Japan (BoJ) is expected to make no changes to its monetary policy settings, when it concludes its two-day June monetary policy meeting this Friday.

Key Quotes:

“We expect the BOJ to leave monetary policy unchanged. The all-Japan core inflation rate (CPI ex-fresh food) fell to 0.7% in April, indicating underlying weakness. We do not see this as a figure that will satisfy the BOJ, which has set a price stability target of 2%.

 At BOJ Governor Haruhiko Kuroda's post-meeting press conference, we expect questions about whether additional easing is needed due to the inflation rate undershooting.

However, Mr Kuroda has previously talked about the ongoing tightening in the macro output gap, and we believe he will state the view that the underlying uptrend in inflation will remain while refraining from making a statement about the need for additional easing.

Moreover, due to the Bank's decision to reduce purchases of long-term JGBs on 1 June, we expect questions about the aim of its reduction, how it interpreted the market's reaction to the decision and the divergence between the target for the pace of long-term JGB purchases set by the BOJ (an annual increase of around JPY80trn in outstanding holdings) and its operation of monetary policy at present.

We believe Mr Kuroda will state his position that intentions with regard to changes to monetary policy are not reflected in daily market operations and that the BOJ will persist with monetary easing.”