30 Apr 2015
BoJ to abstain from expanding QE further, weaker JPY ahead – Danske
FXStreet (Barcelona) - Flemming J. Nielsen, Senior Analyst at Danske Bank, maintains the view that BoJ will not expand its QE program further, and that USD/JPY will head higher in the coming months.
Key Quotes
“It is still our view that BoJ will not expand its QE programme further. The main arguments are i) inflation appears to be bottoming out and should increase markedly in H2 15 as the lower oil price weighs less on inflation, ii) wage growth also appears to have picked up in connection with the spring wage negotiations, iii) GDP growth is still expected to be above potential in the coming quarters and iv) at the moment there is no substantial political pressure for more easing, because focus in the domestic political debate is currently on the negative impact from a weaker JPY on consumption.”
“That said, it will be difficult to reach the 2% inflation target within the next year, so further easing cannot be ruled out.”
“In our view a downward revision of the inflation forecast for FY16 markedly below 2% is probably a necessary condition for additional easing from BoJ. However, with no clear consensus on the BoJ board it is also possible that it instead will be more inclined to give itself more flexibility (time) to reach the 2% inflation target.”
“We stick to our call that BoJ will not expand its QE programme further.”
“We still expect a USD/JPY to move higher in the coming months but it is unlikely to be more BoJ easing that will push USD/JPY out of its narrow trading range so far in 2015. In the short run this will depend on a more hawkish perception of the Fed.”
Key Quotes
“It is still our view that BoJ will not expand its QE programme further. The main arguments are i) inflation appears to be bottoming out and should increase markedly in H2 15 as the lower oil price weighs less on inflation, ii) wage growth also appears to have picked up in connection with the spring wage negotiations, iii) GDP growth is still expected to be above potential in the coming quarters and iv) at the moment there is no substantial political pressure for more easing, because focus in the domestic political debate is currently on the negative impact from a weaker JPY on consumption.”
“That said, it will be difficult to reach the 2% inflation target within the next year, so further easing cannot be ruled out.”
“In our view a downward revision of the inflation forecast for FY16 markedly below 2% is probably a necessary condition for additional easing from BoJ. However, with no clear consensus on the BoJ board it is also possible that it instead will be more inclined to give itself more flexibility (time) to reach the 2% inflation target.”
“We stick to our call that BoJ will not expand its QE programme further.”
“We still expect a USD/JPY to move higher in the coming months but it is unlikely to be more BoJ easing that will push USD/JPY out of its narrow trading range so far in 2015. In the short run this will depend on a more hawkish perception of the Fed.”