BOJ likely to hold its fire – Nomura

FXStreet (Delhi) – Yujiro Goto, Research Analyst at Nomura, expects the BOJ to leave its policy unchanged at its meeting next week (17-18 November).

Key Quotes

“Only three weeks will have passed since the previous meeting and market movements have been encouraging for the BOJ, as USD/JPY and equity prices trade well. The likelihood of a December Fed lift-off is now higher, which will also allow the BOJ to maintain its “wait-and-see” stance for the time being. Expectations of a BOJ easing by year-end have also declined significantly after the disappointment in October. Thus, no policy change is expected by the BOJ and so is unlikely to influence USD/JPY much.”

“Into the December BOJ meeting, external events (ECB and FOMC meetings), the BOJ’s Tankan, and inflation data will be worth monitoring, beyond the likely uninteresting meeting.”

“BOJ disappointment in October did not have much negative impact on the financial markets, which is partly thanks to higher expectations of a December Fed lift-off and the ECB’s renewed dovish stance. Thus, any disappointment from foreign central banks and/or negative market reactions to their decisions could influence market expectations for a BOJ easing again.”

“In addition, the October and November Reuters Tankan suggest downside risk on manufacturing sentiment for the Q4 BOJ Tankan scheduled for publication on 14 December. In addition, import food price inflation has been slowing, which will slow inflation excluding energy and fresh foods gradually. October Tokyo core CPI inflation has slowed and a sustained slowdown in core inflation could influence BOJ’s judgement on inflation trend.”
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