I posted a bit of a preview of the Bank of Japan meeting this week here: Bloomberg poll: 78% of analysts forecast BOJ will expand easing this week

Nomura economists are expecting more from the BOJ. They say the policy package will include:

  1. Additional purchases of ETFs (to JPY6trn/year) and REITs (to JPY180bn/year)
  2. Introduction of negative rates on current loan support programs
  3. IOER cut to -20bp from -10bp

They cite 3 reasons the BOJ will act this week:

  1. The further weakness in underlying inflation momentum
  2. The market has much greatly elevated expectations for easing
  3. There are "political incentives to demonstrate a joint effort to stimulate the economy with fiscal stimulus"

ps. On point 3 there, the WSJ have a piece on the government's pressure on the BOJ to act this week. But there are dissenters on the board.

  • But other BOJ officials are signaling a reluctance to act
  • They note that monetary policy is already extremely accommodative ... and express doubts that additional easing would make fiscal stimulus much more effective, according to people familiar with the central bank's thinking.
  • They also question the need to act now.

Journal may be gated: Bank of Japan Under Pressure to Join In Abe's Stimulus

-

Note - The Bank of Japan meet on July 28 and 29. The policy announcement due on Friday (Japan time) July 29.