BoJ expected to ease further into 2020 – UOB


UOB Group’s Senior Economist Alvin Liew and Senior FX Strategist Peter Chia reviewed the recently published GDP figures in the Japanese economy and the prospects of extra stimulus by the Bank of Japan.

Key Quotes

“Japan’s 4Q 2019 GDP growth contracted by 1.6% q/q (6.3% annualized rate) as the October sales tax and bad weather extracted its toll on private consumption and business spending, offsetting the positive contributions from public demand, net exports and private inventories.”

“We had maintained a cautious stance on Japan’s growth outlook as we see Japan facing significant challenges in 2020. Based on our expectations that the collapse of private spending could extend well into 2020, together with the lingering trade headwinds, and the latest threat of the novel coronavirus (COVID-19), we believe that there is a high possibility that Japan will enter into a recession and we continue to project Japan’s GDP will contract by 0.8% in 2020.”

“We have held the view that the continued forward guidance without action form the Bank of Japan (BOJ) will not be sufficient and the BOJ will eventually renew its monetary easing in 2020. We expect the BOJ to renew easing monetary policy via deepening its negative policy call rate to -0.2% in 1Q 2020 at the March MPM (from -0.1% presently). And potentially other measures will follow if the domestic economic situation turns down further in 2020.”

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