BoJ Decision: Forecasts From Three Major Banks

The Bank of Japan (BoJ) will announce its policy decision on Wednesday, September 23 at 05:00 GMT. here are the expectations forecast by three major banks.

SocGen

“Given that the fifth wave of the coronavirus has begun to be contained, we expect that the BoJ will maintain its current main monetary policy (YCC and ETF purchases). In addition, it extended “the Special Program to Support Financing in Response to COVID-19”, currently set to expire in September 2021, to the end of March 2022 at the June policy board meeting. Measures to support financing will also be maintained. It appears that no matter who the next prime minister is, there will be no major changes to the current main monetary policy. However, if administrative reform and regulatory reform minister Taro Kono becomes the next prime minister, there is a possibility that government pressure on the BoJ will diminish compared to the Abe and Suga administrations and the BoJ could manage the current main monetary policy more flexibly. On the other hand, Kono might advocate a greater role for the BoJ in the climate change fight.”

Standard Chartered

“We expect the BoJ to maintain the policy balance rate at -0.1% and the 10Y yield target at c.0%. The economy has shown a weak recovery trend due to continued quarantine measures in response to the pandemic. The government designated major cities Tokyo and Osaka as emergency areas (i.e., where business activity is restricted after 8pm) until 12 September. Recent high-frequency data shows that industrial production (IP) dropped 1.5% MoM in July, reversing the +6.5% increase in June. As such, we think the BoJ will not consider this an opportune time to change its monetary policy stance.”

Danske Bank

“We expect the BoJ will keep its QQE with yield curve control policy unchanged. With the economy still hampered from the lockdown, it is waiting and see mode until pandemic programmes can be withdrawn next year.”