Flash: Is BoJ easing on the horizon? – UBS

FXstreet.com (New York) - Tuesday’s remarks from Finance Minister Aso suggest the stimulus could take one of two forms – increased spending elsewhere could be used to offset the contractionary impact, notes Research Analyst Gareth Berry.

Key quotes

“Raising the consumption tax by 3% is not going to fundamentally alter that picture, but allowing an economic recovery to boost income and corporate taxes over time just might do the trick.”

“So if Japan pursues fiscal stimulus, FX investors will probably sell yen – not on the prospect of impending fiscal doom, but rather because it fits with Prime Minister Abe’s overall reflation strategy.”

“JPY bears also know that if JGB yields do rise on fiscal concerns, further BoJ easing would likely follow.”