11 Jul 2013
BoJ preview: Risk of Kuroda disappointing limited - Nomura
FXstreet.com (Barcelona) - The BOJ is likely to leave its monetary policy unchanged at this today's meeting (July 10-11), says Yujiro Goto, Strategist at Nomura.
In a recent research noted published by FXstreet.com, Goto is confident to assume that since volatility in the JGB market has decreased, there is no need for the BoJ to rush on further policy responses.
"Expectations for additional easing are likely to be limited and the negative impact of the decision on USDJPY should be smaller than the previous two meetings" Goto said. Since the USD/JPY has fallen quite sharply from the FOMC/Bernanke-induced volatility, one may think that if Goto's assumptions are correct, the risk to the downside may be limited.
Goto thinks "The BOJ will review its economic and inflation forecast and is expected to keep its optimistic economic and inflation outlook, suggesting 2% inflation in two years is possible." The forecasts, in view of Goto, "may still reduce JGB investors' incentives to accumulate JGBs, as the possibility of a earlier rate hike can not be excluded."
Rephrasing what he said several days ago, Goto thinks " BOJ Kuroda needs to re-emphasize that the bank will commit to stabilize the JGB market and will take the necessary measures if volatility in the market rises again. Governor Kuroda's stance became more flexible recently and we believe the risk of governor Kuroda significantly disappointing the market is now lower. The recent rise in USDJPY is also justified by stronger US data, which suggest possible adjustment after the BOJ meeting is likely to be smaller."
In a recent research noted published by FXstreet.com, Goto is confident to assume that since volatility in the JGB market has decreased, there is no need for the BoJ to rush on further policy responses.
"Expectations for additional easing are likely to be limited and the negative impact of the decision on USDJPY should be smaller than the previous two meetings" Goto said. Since the USD/JPY has fallen quite sharply from the FOMC/Bernanke-induced volatility, one may think that if Goto's assumptions are correct, the risk to the downside may be limited.
Goto thinks "The BOJ will review its economic and inflation forecast and is expected to keep its optimistic economic and inflation outlook, suggesting 2% inflation in two years is possible." The forecasts, in view of Goto, "may still reduce JGB investors' incentives to accumulate JGBs, as the possibility of a earlier rate hike can not be excluded."
Rephrasing what he said several days ago, Goto thinks " BOJ Kuroda needs to re-emphasize that the bank will commit to stabilize the JGB market and will take the necessary measures if volatility in the market rises again. Governor Kuroda's stance became more flexible recently and we believe the risk of governor Kuroda significantly disappointing the market is now lower. The recent rise in USDJPY is also justified by stronger US data, which suggest possible adjustment after the BOJ meeting is likely to be smaller."