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According to results of a poll of economists by Bloomberg, the Bank of Japan (BoJ) is broadly expected to remain steady on its current policy stance, but Japan’s central bank will also see growing focus on the range of 10-year JGBs.

Key quotes

“All 46 analysts surveyed by Bloomberg expect no change in monetary policy at the end of a two-day meeting on Oct. 31. Some 63 percent think inflation forecasts will be “largely unchanged” in a quarterly outlook report due out with the policy statement, while 33 percent predict a minor downgrade.

The survey also showed that more than 90 percent of the analysts don’t expect the central bank to take extra action to support the economy when the sales tax is increased next year. Most of them expect the central bank to have tightened policy within a year of the tax rate going up in October.

Most economists expect the bank’s first tightening move to be a raising of the 10-year yield rate, but the survey also showed that a growing number of analysts expect it to further widen the movement range of its long-term yield target as a tightening step by the end of 2020.

About half of the economists also see the BOJ raising its negative rate by the end of 2020, compared with around a third in the previous survey. The central bank uses the rate on some commercial bank balances held at the BOJ to control short-term rates.

The findings suggest that after digesting the bank’s policy tweaks in July, economists are increasingly seeing the end of 2020 as a line in the sand for tightening action.”