Japan: Central Bank and politics in focus - Danske Bank

Next week, the Bank of Japan will meet and the ruling party will hold a leadership vote. According to analysts at Danske Bank, the central bank will keep its policy unchanged.

Key Quotes: 

“In Japan, politics will be in focus next week, with the Bank of Japan (BoJ) meeting (18-19 September) coming up and the ruling Liberal Democratic Party (LDP) holding a leadership vote (20 September).”

“Opinion polls show that a large majority of LDP supporters plan to vote for PM Shinzo Abe and that he has a big lead ahead of the other candidate, Defense Minister Shigeru Ishiba. Hence, it is widely expected that PM Abe will win the LDP leadership vote, which would be a status quo scenario. However, once confirmed, it will (at least on the margin) reduce uncertainty about the government’s economic policy stance, and we could see a temporary positive market reaction after the outcome of the election if Abe wins.”

“We expect the BoJ to keep its policy unchanged and for Governor Haruhiko Kuroda to reiterate a relatively dovish stance, signalling that the BoJ intends to keep interest rates at current levels for a longer period of time. We expect the BoJ to keep its current policy intact until the end of 2019 at least. In terms of data, key releases next week will be the August CPI prints and the first estimate of manufacturing PMI for September (both due on 21 September).”