Barclays with a not more of the same view on the Bank of Japan outlook

  • We retain our forecast for the BOJ to raise its target for long-term yields by a marginal 10bp in Q3 18, assuming CPI inflation is reaccelerating at that time, thereby taking its first step in the direction of monetary policy normalization.
  • The process of normalization from QQE to YCC and from long-term to short-term sectors as the target of YCC could depend heavily on changes in the "distribution" of Policy Board members, including the appointments of the next BOJ governor and two deputies.
  • We believe the BOJ is likely to lower its CPI forecasts when it publishes its next quarterly Outlook Report at the end of the 30-31 October MPM. In today's statement, the BOJ highlighted the sluggish trend not only in realized CPI inflation but also in inflation expectations ("inflation expectations have remained in a weakening phase").

I posted on the BOJ September statement here yesterday:

And Goldman Sachs on the events here: