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31 Mar 2015
BoJ: QQE3 in the pipeline? – JP Morgan
FXStreet (Edinburgh) - According to analysts at JP Morgan, the BoJ could announce further easing in the upcoming months.
Key Quotes
“The BoJ launched QQE2 last October because inflation (ex the April 2014 VAT increase) was decelerating from its 2% target. It still is”.
“One reason policymakers have quelled their usual calls for more easing is that a weaker yen has been unpopular with consumer and small business, and local elections will be held in two rounds on April 12th and 26th”.
“But when the Bank of Japan releases its next semi-annual report on April 30th they will probably downgrade their inflation outlook, thus justifying another round of easing in Q3”.
“We are unsure of the precise timing for this move and have significant concerns about the eventual limits to BoJ balance sheet expansion, but still think long USD/JPY should be a core position during the first phase of Fed tightening”.
“Even if the BoJ fails to ease again, capital outflows might still weaken the yen – or at least prevent much appreciation – since equity outflows are now rivaling bond outflows”.
Key Quotes
“The BoJ launched QQE2 last October because inflation (ex the April 2014 VAT increase) was decelerating from its 2% target. It still is”.
“One reason policymakers have quelled their usual calls for more easing is that a weaker yen has been unpopular with consumer and small business, and local elections will be held in two rounds on April 12th and 26th”.
“But when the Bank of Japan releases its next semi-annual report on April 30th they will probably downgrade their inflation outlook, thus justifying another round of easing in Q3”.
“We are unsure of the precise timing for this move and have significant concerns about the eventual limits to BoJ balance sheet expansion, but still think long USD/JPY should be a core position during the first phase of Fed tightening”.
“Even if the BoJ fails to ease again, capital outflows might still weaken the yen – or at least prevent much appreciation – since equity outflows are now rivaling bond outflows”.