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While major central banks have made progress toward their inflation goals, the inflation environment in Japan has remained very weak, according to analysts at Nomura.

Key Quotes

“The BOJ is analysing the reasons behind inflation weakness into the July meeting, and we expect its conclusion to emphasize the difficulty inherent in changing the deflationary mindset in Japan. As a result, the Bank will lower its inflation forecast broadly and significantly, pointing to a more prolonged period of monetary easing.”

“The outcome will be a medium-term negative for JPY but positive for Japan’s equity market. At the same time, the BOJ may consider measures to alleviate negative impact on financial institutions, and we will monitor any media leaks on possible measures from the BOJ, which could lead higher JGB market volatility, as a short-term downside risks for USD/JPY.”