BOJ not expected to change policy – BBH

According to analysts at BBH, the BOJ is not expected to change policy this week as the headline inflation is rising at half the pace of the Eurozone. 

Key Quotes

“The BOJ could shave this year's inflation forecast of 1.1%.  It stood at 0.7% in September.  One of the BOJ's innovations was the yield curve targeting, with the deposit rate set at minus 10 bp and keeps the 10-year yield in a 10 bp range around zero.  Its next move could be to adjust its yield curve strategy, and there has been some discussion of targeting the belly of the curve (5-year yields),  but that may be a 2018 decision.  Separately, the LDP recent electoral victory has bolstered the likelihood that Kuroda gets an unusual second term, according to local surveys.”

“Market Impact:  Limited market reaction barring a surprise.  The key to the dollar-yen is the US 10-year yield.  Meanwhile, foreigners have continued to increase exposure to Japanese equities.  There has been strong buying in the four-week period ending October 20, according to MOF data.”