BoJ: Do not expect to ease monetary policy – Danske Bank

Research Team at Danske Bank, suggests that we have a rather thin data calendar today and are probably in for a quiet day as investors await the Bank of Japan (BoJ) and FOMC monetary policy announcements tomorrow.

Key Quotes

“Note that the BoJ is due to announce its monetary policy decision early on Wednesday morning, European time. Focus will be on the comprehensive assessment for any indications of a change in the monetary policy framework and/or additional monetary easing. We do not expect the BoJ to ease monetary policy as such but expect it to adjust its policy framework by (1) changing its wording on when it expects to achieve its 2% inflation target and (2) adding some flexibility to its government bond purchase programme while maintaining its negative interest rate policy.

In our main scenario, we think that the BoJ will disappoint relative to market pricing, which could weigh temporarily on risk appetite and send USD/JPY lower. However, the tail risk is that the BoJ will surprise and fire the big bazooka with another round of aggressive monetary easing.”