BoJ: Continuation of the QQE programme - ING

Analysts at ING explain that as the major central bank that has engaged in unorthodox policies for longer than any other, it'a probably no surprise that they expect nothing other than a continuation of the BoJ’s QQE programme and bond yield targeting for the foreseeable future.

Key Quotes

 “That said, it will come as some relief for the BoJ that it can maintain its zero bond yield target for far less than the JPY80tr annualised pace of purchasing that it still notionally commits itself to in its monetary policy statements. We say this because the availability of assets for the BoJ to purchase in the secondary market is fast running out of room. It's problem not unique to the BoJ but has also troubled other fast printing central banks such as the ECB.”

“Things in Japan are looking better than they have for some time. Japan's GDP growth equates to trend or higher growth. The 2Q17 GDP outcome of 4.0% annualised will almost certainly either be revised down or give way to weakness in 3Q17, breaking this run of growth. Even so, the trend will still look good, and even the inflation numbers are beginning to nudge higher.”

“Governor Kuroda will see no benefit in changing the BoJ stance now, especially against the background of USD weakness; any change would likely just fly straight into a stronger JPY and start to undo any of the good the policy may be doing.”