BOJ Review: Upbeat economy and downbeat inflation – Nomura

Analysts at Nomura note that the BOJ left its policy unchanged as widely expected in its latest meet and while the Bank’s view on the economy has improved, but its inflation forecast was lowered.

Key Quotes

“The Bank’s risk assessment is also still skewed to the downside. The BOJ’s dovish stance has not changed materially. Governor Kuroda repeated that it is premature to discuss the exit strategy. He said the BOJ needs to achieve the 2% inflation target before talking about the exit, although CPI inflation is unlikely to exceed 2% in a stable manner until after FY2018.”

“The market now likely expects the BOJ’s next policy change to be tightening/normalisation, but Governor Kuroda’s stance suggests the likelihood of near-term normalisation remains low. The BOJ’s reluctance to discuss its exit strategy should limit upside risk for JPY, while the BOJ still needs external tailwinds for JPY weakness.”