BOJ to remain on hold, revise down core inflation - BAML

The BOJ policy outcome is due shortly, and analysts at BAML run a quick preview on what to expect from the announcement.

Key Quotes:

“We expect the Bank of Japan to remain on hold

Keeping both its targets for rates and asset purchases unchanged

Will likely upgrade its FY17 GDP forecast while downgrading its FY17 core inflation forecast

But the revisions are likely to be modest and unlikely to spur changes in the policy stance

Given the central bank's bond buying has continued to slow, the focus is on whether the policy board drops the ¥80tn "guideline" for JGB purchases from its monetary policy statement. The possibility cannot be ruled out, but our base case is that the BOJ refrains from announcing tapering officially, even if the central bank's JGB purchases continue to slow in reality.

Looking ahead, we expect the BOJ to stay on hold until at least the end of Governor Kuroda's current term, and most likely FY18, given that growth in ex-energy core inflation measures is likely to remain far from target.”