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Speculation has been mounting about further action from the Bank of Japan, given the recent weakness in the economy.

The team at Credit Agricole circles the end of October as the preferred date for action:

Here is their view, courtesy of eFXnews:

Our economists have front loaded their expectations for QE to 30 October when the BoJ will release its semi-annual report on the economy and prices.

Next week’s BoJ meeting and data out of Japan could provide important signals that could corroborate or dampen investors’ QE expectations. The BoJ meeting and Kuroda’s press conference will be scrutinised closely for indications that the policymakers’ view on the economy is shifting. Indeed, inflation has clearly disappointed the BoJ’s expectations and the Japanese economy seems on course to contract in Q3 with the outlook increasingly uncertain because of China.

All this has been weighing on Japanese stocks while triggering unwarranted strengthening of JPY of late. More QE maybe needed to address these issues in due course.

We suspect that next 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.

 

More QE expected on October 30 to support the Nikkei and keep JPY from ralling

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