Analysts at Nomura note that the Japanese government’s draft of its basic policy on Economic and Fiscal Management and Reform released today again expects the BOJ to achieve the price stability target “at the earliest possible time”.
Key Quotes
“In the government’s annual update of its basic policy, it did not use the “at the earliest possible time” expression from 2015 to 2017, after using it in 2014. Then, just four months later, the Bank expanded its monetary accommodation in October 2014 (QQE 2). This draft of the basic policy focuses on creating the right economic environment to ensure the scheduled tax hike in October 2019, and the government likely wants the BOJ to support the economy with an accommodative policy stance. This may not suggest additional easing, but it suggests BOJ tightening is still far away.”
“The monetary policy divergence story will likely remain a key factor in preventing JPY appreciation.”
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