A preview of the Bank of Japan meeting courtesy of eFX
I'm typing this quick so it is, in fact, a preview ... not long to go now!
Barclays: We have frontloaded our BoJ easing call to the 30 October 2015 meeting from the April 2016 meeting due to the downward revisions in corporate inflation expectations. While our baseline call is for end-October, we also see a risk of preemptive action as early as at this week's BoJ meeting (Wednesday). With regards to specific easing measures, we expect the BoJ to 1) increase the annual pace of monetary base expansion to JPY100-110trn from the current JPY80trn, 2) increase JGB purchase to JPY100trn from JPY80trn, 3) extend the average duration of JGB purchases to 9-12y from 7-10y, 4) increase equity-linked ETF purchase to JPY6trn from JPY3trn, and 5) cut IOER by 5bp to 0.05%. While uncertainty remains as to what the BoJ actually undertakes when easing further, a decisive action could pose an upside risk to our USDJPY forecast of 123 at the end-2015. Inaction this week may temporarily weigh on USDJPY, but market expectations for an action on October 30 will likely remain live, limiting the downside for the pair.
Morgan Stanley: We expect the BoJ to leave policy unchanged at tomorrow's meeting. In fact, our economists are not expecting any further easing from the BoJ, anticipating a greater emphasis on domestically orientated policy with the potential for further fiscal stimulus now receiving greater attention. A fiscal, rather than a monetary, response in Japan would be a further positive factor for the JPY, we believe. USDJPY has been range bound for the past month. A test of the bottom end of the range at 118.60 in a more risk positive environment would also send a strong message, suggesting that the JPY is not being used for funding purposes and is, in fact, attracting investment flows. We look for EURJPY to move lower, targeting a move below the previous 132.25 September lows towards 130.00.
Credit Agricole: Our economists have frontloaded their expectations for QE to 30 October when the BoJ will release its semi-annual report on the economy and prices. We suspect that this week maybe too early for the BoJ to send a strong hint that more easing is coming. While positive for JPY initially, we suspect that there will be investors to sell into the rally eyeing more QE at the end of the month.
BofA Merrill: We believe the central bank is likely to maintain the current pace of monetary easing because (1) it is due to revise its economic and inflation forecasts at the subsequent MPM in about three weeks' time (30 October) alongside its Outlook Report; and (2) we do not think current share prices and the yen exchange rate have reached levels that require urgent monetary easing. However, the question of whether the BoJ will act to ease in the near future (30 October, or at the subsequent few MPMs) has become a closer call, since financial and currency markets have remained unstable since August, on top of which some economic data are coming in below expectations.
BNPP: Running USD longs vs the EUR and JPY has been challenging. At some point, action from their central banks could counter this tendency, but we expect the BOJ to refrain from new action or hints at this week's policy meeting.
JP Morgan: Despite the fact only around 5% of surveyed economist think the BOJ will take additional action at this meeting we expect to see buyers of USD on dips today, just how big those dips are depends on the equity markets. Risk reward dictates being long for this meeting regardless of the outcome with a core long for both BoJ meetings. In addition to that buying dips today for the meeting makes sense too. Support comes in around 120.00‐05 and 119.60, the ideal buy zones, while significant resistance remains at 120.65‐70, 120.90 and pretty much everywhere on the 121 handle. There is hope though that the BoJ will shake USD/JPY from it benign and at times tedious rang
RBS: The Bank of Japan holds its early-October monetary policy meeting today, and we expect the BoJ to leave its policy stance unchanged. We expect the BoJ will wait at least until the next update of its semi-annual Outlook Report, which is due alongside its lateOctober policy decision, before deciding on any additional easing. While we see the BoJ as likely to leave its policy stance unchanged at both meetings this month, expectations around a late-October policy change appear to be rising
UBS: Little is expected from the BoJ's meeting on Wednesday, but there are growing expectations that the BoJ will ease monetary policy on October 30, and they may hint at this tomorrow. USDJPY should be supported heading into this and we recommend buying the pair around 120.00.
SocGen: The BOJ meeting at the end of the month is expected to result in further easing, and failure to act could trigger another test of the downside in USD/JPY.
BTMU: We continue to expect the BoJ to leave QQE unchanged at their upcoming meeting on October 6-7, although acknowledge that the risk of further easing has increased. Building expectations of further BoJ easing may begin to weigh on the yen this week. The weaker than expected industrial production report for August has reinforced concerns that Japan's economy may have fallen into technical recession in Q3. The economic slowdown in China is increasing external risks to growth in Japan as well.
ING: BoJ meets on Wednesday to set monetary policy. The more important meeting, however, will be that of 30 Oct. With the BoJ's core inflation measure (ex food) near zero, the BoJ's progress to a 2% CPI target has stalled. Despite this, we do not look for fresh QQE from the BoJ in October...and no turbo-charged JPY decline.
