BoJ: On hold, split between no inflation and firm growth – HSBC

James Lee, Economist at HSBC, explains that the BoJ adjusted its inflation expectations, such that the CPI is now expected to reach the 2% target by around FY2019, instead of FY2018 previously.

Key Quotes

“Indeed, the Bank revised down their core CPI trajectory through FY2019, noting cautious wage and price setting behaviour by firms, but still upgraded their growth outlook. Meanwhile, as widely expected, the BoJ kept policy rate at -0.10% and 10y JGB target at 0.00%, while the guidance on the pace of asset purchases was also unchanged. The accompanying press conference by governor Kuroda suggested that the BoJ will maintain its current policy setting.”

“All said, the large disconnect between improved growth conditions and low inflation should keep the BoJ accommodative, while the Bank will closely watch wage growth in the coming quarters for signs of any acceleration.”