BoJ Takes a Breather But is Poised to Ease Further

BoJ Takes a Breather But is Poised to Ease Further

After it expanded its asset purchase programme in both September and October, we do not expect Bank of Japan (BoJ) to announce new substantial easing measures in connection with this week's monetary meeting closing tomorrow. This is also the consensus view and we do not expect a major market reaction.

However, with Japan in recession, political pressure for more easing is intensifying and the BoJ board is poised to be more dovish next year. BoJ remains on an aggressive easing path and we expect the target for its asset purchase programme to be raised by JPY10-15trn as soon as its next meeting in December.

Besides BoJ expanding its asset purchase programme next year we also expect the maturity of BoJ's bond purchases to be increased and the inflation target to be raised from 1% to 2% at some stage next year. Negative interest rates in Japan do not appear to be imminent.