BOJ: No major changes to policy stance coming? – TDS

TD Securities analysts point out that the BOJ does not have the typical luxury of following the Fed and they think this fact alone is enough to prevent the BOJ from making major changes to its own policy stance.

Key Quotes

“With changes to the ECB and the Fed however, we wonder if the BOJ will feel left out of the party. This is not the BOJ of old however, which has, in the past proven to be trigger happy to ease. Instead, we think the Bank has evolved to be less interventionist and more preoccupied with safeguarding financial stability.”

“If the BOJ were to join the Fed and ECB in conducting a policy tweak, it would likely be targeted towards enhancing forward guidance and/or JGB flexibility. We do not see an urgency to make this change at this time as JGB functioning looks to be satisfactory enough. They also appear to be less ardent inflation sympathizers than in the past; indeed, rhetoric from the Bank has become more sympathetic to a flexible inflation rate and acknowledging measurement bias.”

“We firmly reject more negative rates, which has been a resolutely unpopular decision with calls from the financial community to even roll it back. We will spend more time on this subject tomorrow.”