BoJ Preview: Forecasts from seven major banks, holding fire, slashing price outlook

The Bank of Japan (BoJ) will announce its policy decision on Thursday, October 28 at 03:00 GMT, and as we get closer to the release time, here are the expectations forecast by the economists and researchers of seven major banks. The central bank is unlikely to alter its monetary policy but it is seen cutting growth and price outlook.

See BoJ’s Preview by FXStreet’s Dhwani Mehta to discover how this event can affect the USD/JPY pair.

ING

“The BoJ is likely to retain its accommodative stance, so we don’t expect any surprises here.”      

MUFG

“We expect the BoJ to keep monetary policy unchanged, with the policy rate at -0.1% and the target level for the 10Yr JGB yield at around zero percent, with a range of 25bps.” We expect the Monetary Policy Board to split its time addressing: 1) the Outlook Report: corporate and household sector conditions amidst rising prices resulting from a weakening JPY and resource prices climb; and 2) a checkup of the financial system, especially restructuring of the regional banking sector.”

Standard Chartered

“We expect the BoJ to maintain the policy balance rate at -0.1% and the 10Y yield target at c.0%. We think the BoJ has less headroom to normalise liquidity given the slow economic recovery and low inflation. Moreover, we think it is hard to ease policy given global inflationary pressure.”

Danske Bank

“While the pandemic programme has increased loans, they have been unwinding government bonds for about a year now. The October reopening of the economy is convenient at a stage where exports are declining sharply amid lack of supplies. It will be interesting how the BoJ assesses the recent significant JPY weakening after the cabinet has been out warning for the need for a stable currency this week. We expect no changes to the bank’s QQE with yield curve control.”

BBH

“Updated macro forecasts will be released. Reports have emerged that the BoJ will lower its inflation forecast for FY21 to around 0% from 0.6% due to re-basing of the CPI. FY21 growth forecast will reportedly be cut too, but FY22 would be raised. Overall, we expect the updated forecasts to signal a dovish hold that suggests no liftoff before FY24 at the earliest. FY24 will be added with the April 2022 Outlook Report and is likely to show inflation remaining well below the 2% target, which would mean no liftoff until FY25 at the earliest.” 

SocGen

“We expect that the BoJ will maintain its current main monetary policy (YCC and ETF purchases). The BoJ will judge that the delay in the economic recovery and the reduction of the price outlook will not be enough to take additional easing into consideration. Although the outlook remains uncertain, it will nevertheless maintain its forecast that the economy will improve as COVID-19 infections subside. In addition, according to the September Tankan survey, the financial positions of both large and small enterprises improved. Therefore, measures to support financing will also be maintained.”

Citibank

“We do not expect any surprises from the BoJ Monetary Policy Meeting, with the bank sticking to its current monetary policy.”