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1 Apr 2015
Expect further stimulus by BoJ in coming months – Rabobank
FXStreet (Barcelona) - With Japan’s CPI trending flat in spite of BoJ’s stimulus, and inflation expectations failing to rise, Jane Foley, Senior Currency Strategist at Rabobank, predicts that the central bank might come up with further easing measures in the coming months.
Key Quotes
“The overnight results of the Bank of Japan’s Quarterly Tankan report have provided further evidence that Japan has only mustered sufficient energy to shuffle away from last year’s consumption tax hike induced recession.”
“Despite the impact of cheaper energy prices, both manufacturers and non-manufacturers expect conditions to worsen in the coming three months.”
“In reflection of the poor outlook, big firms expect to cut capital expenditure by 1.2% in the new fiscal year, counter to market expectations of a 0.5% rise.”
“This news will have come as a severe knock back to the pledge made by BoJ Governor last year that he will “drastically convert the deflationary mindset” with monetary policies which are “totally different from past policies”."
“BoJ Governor Kuroda was in February quoted as saying that “in order to escape from deflationary equilibrium, tremendous velocity is needed, just like when a spacecraft moves away from Earth’s strong gravitation”.”
“Currently the BoJ’s QE programme is committed to purchasing JGBs at an annual pace of about 80 trillion yen - with a view to encouraging a decline in interest rates across the entire yield curve; (2) to purchase ETFs and J-REITs at an annual paces of about 3 trillion yen and about 90 billion yen, respectively; and (3) to maintain the amounts outstanding of CP and corporate bonds at about 2.2 trillion yen and about 3.2 trillion yen, respectively.”
“However, even with this massive amount of stimulus Japanese CPI inflation was flat y/y in February once the effects of last year’s consumption tax was stripped out.”
“It is against this backdrop that we are expecting that further stimulus of some description will be announced by the BoJ in the coming months.“
Key Quotes
“The overnight results of the Bank of Japan’s Quarterly Tankan report have provided further evidence that Japan has only mustered sufficient energy to shuffle away from last year’s consumption tax hike induced recession.”
“Despite the impact of cheaper energy prices, both manufacturers and non-manufacturers expect conditions to worsen in the coming three months.”
“In reflection of the poor outlook, big firms expect to cut capital expenditure by 1.2% in the new fiscal year, counter to market expectations of a 0.5% rise.”
“This news will have come as a severe knock back to the pledge made by BoJ Governor last year that he will “drastically convert the deflationary mindset” with monetary policies which are “totally different from past policies”."
“BoJ Governor Kuroda was in February quoted as saying that “in order to escape from deflationary equilibrium, tremendous velocity is needed, just like when a spacecraft moves away from Earth’s strong gravitation”.”
“Currently the BoJ’s QE programme is committed to purchasing JGBs at an annual pace of about 80 trillion yen - with a view to encouraging a decline in interest rates across the entire yield curve; (2) to purchase ETFs and J-REITs at an annual paces of about 3 trillion yen and about 90 billion yen, respectively; and (3) to maintain the amounts outstanding of CP and corporate bonds at about 2.2 trillion yen and about 3.2 trillion yen, respectively.”
“However, even with this massive amount of stimulus Japanese CPI inflation was flat y/y in February once the effects of last year’s consumption tax was stripped out.”
“It is against this backdrop that we are expecting that further stimulus of some description will be announced by the BoJ in the coming months.“