Japan: No helicopter for now, BoJ to wait for budget plan - TDS

According to analysts from TDS, the Bank of Japan will opt to hold fire this month in favour of future stimulus that is coordinated with a concrete fiscal plan by the fall.

Key Quotes:

“Expectations are running high for the BoJ to deliver some form of monetary stimulus. More importantly, there are grand expectations for this to be delivered alongside massive fiscal stimulus.”

“While we think sizable fiscal support is impending, we think the BoJ will opt to wait for a concrete budget plan in the coming weeks before easing further in a coordinated fashion, likely in the fall.”

“If the BoJ eased, we think there are several low-hanging fruit options and more likely to be around supporting banks than just an ETF expansion alone to have a durable impact on risk. “Chopper money” has received notoriety in the press but we see several issues related to implementation risk at this juncture.”

“Beyond the immediate event risk of a BoJ disappointment however, we caution in chasing a move lower in USD/JPY below key support of 103.35/60 as impending fiscal stimulus should act as a deterrent. Ideally, a dip towards the 104.00/50 range might offer an attractive zone to accumulate long into the fall.”