BOJ to leave monetary policy unchanged – Nomura

Analysts at Nomura expect the BOJ to leave monetary policy unchanged at this week’s meeting as they see no clear issue with the economic climate, with evidence of solid corporate business conditions in the BOJ September Tankan survey.

Key Quotes

“Core CPI inflation is likely to be weaker than the BOJ projected, in our opinion, but is on a moderate uptrend and we expect the BOJ to keep its assessment that inflationary momentum is being maintained.” 

“Real GDP growth figures for April-June, published after the July Outlook Report, were on the high side, up 2.5% q-o-q, annualized. The FY17 real GDP growth forecast in the Outlook Report was a bullish 1.8% y-o-y, and may have already factored in to some extent the acceleration in growth in April-June. We expect the BOJ’s real GDP forecast to be unchanged.” 

“The July Outlook Report projected core CPI inflation of 1.1% y-o-y in FY17, but for this to be attained inflation should have increased to more than 1% y-o-y by now. In August, the inflation rate picked up, but only moderately, to 0.7% y-o-y, thus we believe the BOJ will have little choice but to lower its inflation forecast for FY17, 0.8% y-o-y, from 1.1% y-o-y. We expect forecasts for FY18 and FY19 to be left as they were.”