BoJ meeting is the big event this week – Deutsche Bank

Research Team at Deutsche Bank, suggests that the big event this week is the BoJ meeting outcome on Friday morning.

Key Quotes

“Our Japan economists expect a cut in the interest rate on its policy-rate balance from -10bps to -20bps and an increase in its purchasing of EFT’s and J-REITSs (to an annual rate of ¥6tn and ¥180bn, respectively). They do however see little chance of an increase in JGB purchasing pace. Rather, they think that the bank could make its JGB purchasing operations more flexible (e.g. annual ¥70-90tn) and indicate no more acceleration of JGB purchasing.

Our colleagues also expect BoJ Governor Kuroda to be questioned about helicopter money in his post meeting press conference, but expect him to deny that the bank is even considering the option and so disappointing those expecting an imminent launch of a radical helicopter money scheme. In terms of the wider market expectations, consensus is for the policy rate to be cut to -30bps and monetary base held at ¥80. According to Bloomberg, 32/41 economists surveyed expect some form of further monetary policy easing with an increase in ETF purchases seemingly looking the most likely.

It’ll also be important to keep a close eye on any further details this week around the scale of the much talked about fiscal stimulus package. Last week press reports suggested that this package could be worth over ¥20tn, although our Japan economists also argue that the government has an incentive to make its stimulus package appear as large as possible and that the government has demonstrated a range of methods over the last 25 years to inflate the value of supplementary budgets. We should get the contents of the second supplementary budget for FY16 sometime this week or next.”