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BoJ expected to refrain from further easing – BTMU

FXStreet (Barcelona) - With BoJ set to meet in the week ahead and also release its semi-annual economic outlook report, Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, expects the central bank to lower its growth and inflation forecasts for 2015, and further anticipates the bank to refrain from further easing.

Key Quotes

“The yen has firmed modestly so far this year in part as overseas central banks have eased monetary policy which has made BoJ monetary easing relatively less aggressive. The BoJ has been signalling that it is unlikely to respond to the recent decline in inflation driven by lower energy prices.”

“The BoJ are scheduled to meet again in the week ahead to discuss monetary policy and will release their semi-annual economic outlook report. The report is expected to reveal modest downward revisions to their economic growth and inflation forecasts for the current fiscal year.”

“In their latest updated forecasts from January, the BoJ revealed that they expected real GDP and core inflation to expand by annual rates of 2.1% and 1.0% respectively in the current fiscal year. Core inflation was then expected to accelerate to 2.2% in the next fiscal year. The BoJ’s updated economic outlook report will also include forecasts for fiscal year 2017 for the first time.”

“If the updated forecasts reveal that the BoJ expects to core inflation to stabilize at around 2.0% in the coming fiscal years, they should support the BoJ’s decision to leave monetary policy unchanged and may even begin to prompt some speculation that the BoJ is moving closer to tapering.”

“BoJ Governor Kuroda has signalled that he aims to achieve 2.0% inflation on a sustained basis. We will also be watching closely to see if the BoJ pushes back the timing of achieving their target of inflation from the current fiscal year into the next fiscal year.”

“Without further easing from the BoJ, the yen is likely to continue to trade on firmer footing in the near-term reversing some of its significant undervaluation.”

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