BoJ to leave monetary policy unchanged on Friday - Nomura

Analysts at Nomura offer a detailed preview at what to expect from April’s Bank of Japan (BoJ) monetary policy announcement after the Japanese central bank concludes its 2-day policy meeting this Friday.

Key Quotes:

"We expect the BOJ to leave monetary policy unchanged.

This will be the first meeting since the reappointment of Governor Haruhiko Kuroda and the appointment of Deputy Governors Masayoshi Amamiya and Masazumi Wakatabe.

Based on remarks made by the three nominees before the Diet, we expect no immediate changes to monetary policy.

In the Outlook for Economic Activity and Prices (Outlook Report), which will be released at the same time, we expect the core inflation forecasts for FY17 and FY18 to be lowered by 0.1 percentage points (pp) as we believe signs of acceleration in inflation in the run-up to the end of March were scarcer than anticipated by the BOJ.

We expect the core inflation forecast for FY20 (excluding the effect of an increase in the consumption tax rate), which will appear in the forecast for the first time, to be the same as the 1.8% forecast for FY19.

We expect a slightly lower GDP growth forecast for FY17 and FY18, reflecting the slowdown in growth in January-March, and FY19 to be unchanged.

The first FY20 GDP growth forecast should continue to be in line with potential growth, if we assume no rise in the consumption tax rate in October 2019. We would expect a growth forecast of 0.6% if the downturn in response to the demand surge prior to the consumption tax hike is taken into consideration.

At the governor's post-meeting press conference, we expect questions on the JPY80trn annual JGB purchase target, the need to continue ETF purchases, and the possibility of raising the target for long- and short-term interest rates under YCC.

With the new line-up of deputy governors, we are interested - from the perspective of gauging the policy stance - to see whether or not the tone of their answers to these questions changes.”