BoJ next monetary policy measures

14 March, AtoZForex, London – In the aftermath of the ECB rate cut and the focus on the FOMC rate decision this week, get ready for the verdict of the BoJ monetary policy meeting tomorrow. What are the BoJ next monetary policy measures, will the policymakers opt for more easing or leave it unchanged? Considering that the late-January adoption of negative interest rates has been unpopular and failed to reverse the risk-aversion, which hit the stocks market and forced the yen up.

BoJ next monetary policy measures

The majority of investment banks believe that the BoJ refrain from taking action, thus keeping its annual asset purchase program at Y80tn, while the deposit rate to remain at minus 0.1%.

Goldman Sachs believes the BoJ has made three miscalculations with the introduction of negative interest rates. First the policy has failed to prevent JPY appreciation. Second, NIRP has thrown the Japanese financial institutions business models into turmoil. Third, public has reacted very negatively.

“We expect the BOJ to maintain current policy, primarily because public sentiment toward its decision to adopt the negative interest rate policy (NIRP) at the end of January remains very unfavorable,” Goldman Sachs noted. Nonetheless, it still expects additional easing in June.

After the surprise adoption of negative interest rates in January, Bank of Japan officials have been scurrying to commercial banks to apologize, while Prime Minister Shinzo Abe has even distanced himself from the decision.

Also see: Positive US data calls for March Fed rate hike?

BoJ to lower rates further

Credit Suisse meanwhile sees the recent cut by the ECB as a potential encouragement for the BoJ to lower the rates further.

“While we still believe that an expansion to the core QE measures – the monetary base outstanding growth target and the JGB purchase amount, would not be so likely, if the Bank moved, rate cuts would be on the list of options,” Credit Suisse added.

From technical perspective, Deutsche Bank argues that USDJPY should remain top-heavy tomorrow if the BoJ does not ease police further.

While, “in the unlikely event that the BoJ does ease further through ETF purchases and the like, and the USDJPY rebounds to above 114, it will be a sellers’ market for Japan hedgers,” Deutsche Bank added.

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