A very helpful compilation from eFX: What To Expect From BoJ? - Views From 12 Major Banks
Goldman: We see $/JPY upside as highly actionable on a three month horizon. As we laid out, the median forecast of policy board members of 0.7 percent annual average inflation in FY2015 required a herculean pick-up in sequential inflation even before recent events in Asia. Governor Kuroda has been adept at surprising markets since the start of his tenure and, though our official call is for the second October meeting, we cannot rule out action sooner, especially given the move in the QSS survey of inflation expectations. Our 12-month forecast of 130 bakes in additional easing from the BoJ and we see this level as a good target should another material round of stimulus materialize.
Barclays: While neither we nor the markets expect policy changes at this meeting, Governor Kuroda's press conference will be scrutinized. On August 27, BoJ Governor Kuroda reaffirmed his confidence that "the economy and prices are trending in line with our expectations, and we believe the 2% price target can be reached with the current QQE" - ie, without additional easing. We are maintaining our view of no further easing until next April, but any changes in his assessment of the recent development or any hints on policy reactions will be watched closely, particularly as the yen strength and renewed drop in oil prices may weigh on the inflation outlook. In terms of economic assessment, we look for the BoJ to keep its overall assessment of the domestic economy largely unchanged, but their views on overseas economies and exports are likely to be downgraded given recent developments.
BofA Merrill: We maintain our main scenario that the BoJ would stay on hold. We believe the Japan economy will likely recover July-September onwards as the historically high corporate profits feed through capex and wage/consumption, the recovery of the US economy absorbs the impact of slower Chinese growth, and inflation (excluding energy) continues to improve.
BNPP: The Bank of Japan concludes a two-day policy meeting on Tuesday and, while no change in policy is anticipated, market participants will be watching the press conference for any indications on whether further easing could be coming at the October 30 meeting when the Bank will publish its semi-annual Outlook Report. Our economists expect the BOJ to refrain from further action this year absent a material surge higher in the JPY. However, they note that the possibility of an October move has risen somewhat given recent market volatility and slowing activity. A neutral message from the BOJ this week would suggest some upside risk for the JPY and this could be compounded by Fed dovishness Thursday. However, flow data continues to show consistent Japan investor demand for foreign securities, and we expect investor flows to limit JPY upside.
RBS: The Bank of Japan decides tonight, and we expect the BoJ to leave its policy stance unchanged at least until its semi-annual Outlook Report update in late October. Nikkei News did report last week that the BoJ may revise down its international growth outlook and, with it, the outlook for Japanese exports. But with a still positive outlook for the domestic economy, we think the BoJ will leave its policy unchanged - the BoJ has noted it expects a rebound in both GDP growth and inflation rates later this year, a stance supported by Governor Kuroda's comments to parliament today, and a wait-and-see stance may be appropriate for now as it awaits more evidence of whether these views prove correct. On August 26th, BoJ Governor Kuroda insisted that the BoJ at this stage has "no concrete proposal for further accommodation."
Deutsche Bank: We expect the BoJ to leave its QQE intact at this week's Monetary Policy Meeting (on Monday to Tuesday). The market impact should be nil. However, some market speculation of an additional BoJ easing in October could help underpin the USD/JPY at its current level of ¥120, where motivation is scant.
BTMU: The BoJ are likely to acknowledge that downside risks to external demand have increased at this week's policy meeting although are unlikely to ease policy further. Over the last week expectations have been building that the BoJ could ease policy further in autumn in response to the deteriorating outlook for growth and inflation which is helping to dampen scope for the yen to strengthen further in the near-term. As a result market participants will be watching closely comments at this week's press conference from Governor Kuroda for any potential signal that the BoJ is moving closer to easing policy further before year end which could weigh on the yen.
Credit Agricole: The JPY has been under pressure of late, mainly due to stabilising risk sentiment and somewhat rising expectations of the BoJ moving closer towards considering further monetary stimulus. Weak growth conditions and external factors such as weak oil prices dampening the impact on price developments have been decreasing the probability of the central bank reaching its 2% inflation target anytime soon. Indeed BoJ Governor Kuroda confirmed this week that the central bank may fall behind the schedule of achieving 2% inflation next year. Nevertheless, for now their base case remains for growth momentum to re-accelerate in the months to come. This in turn suggests little scope of them considering additional policy action this week.
Danske: At the latest meeting the BoJ did not signal imminent easing and we do not expect the BoJ to announce additional easing measures. However, while our main scenario remains that the BoJ will continue its current QE programme until 2017, the likelihood of additional easing has increased substantially in recent months due to lower oil prices, modest real wage growth and not least JPY outperformance relative to most other Asian currencies. As such, the BoJ will probably prefer to await further clarification about the outlook for Chinese economy and not least the Fed position before it decides on its monetary policy. However, given the lower oil price, the BoJ will almost certainly have to revise down its semi-annual outlook report which will be released at its 30 October meeting. A downward revision of its CPI forecast for FY 2016 is in particular a factor that could trigger a policy response from BoJ.
Credit Suisse: We don't expect any change in policy this week. However, we attribute a growing probability of another round of easing at the 30 October meeting. Recent commentary from the BoJ suggests that the bank is likely to downgrade its growth and inflation forecasts. Additionally, the possibility of a stronger JPY due to risk-off flows or a delay in Fed hiking expectations could put added pressure on the BoJ to act in the coming months. We see the outlook for USDJPY over the next couple of months as extremely binary. Another round of easing could push USDJPY up toward 130, while a failure to act and a delay in Fed hiking expectations could drive the cross materially lower.
SocGen: Further BOJ easing is expected, but not until next month at the earliest. It's hard to see USD/JPY move much lower unless risk aversion returns in earnest, but we do still like short GBP/JPY ad short NZD/JPY as structural trades
UBS: Various Japanese economic data series have started to hint at the risk of slower-thanexpected Q3 recovery, but the BoJ stands by its bullish assessment that no further easing will be needed. Even then we believe it is likely to ease if Q3 GDP is weak and the exchange rate is around ¥117-120/$ or so. If the yen weakens to around ¥125/$, we think the adverse impact on consumption could be mitigated by packaging action with a supplementary budget to support household finances. On the other hand, if it looks as though the yen will weaken beyond ¥125/$, concerns over household consumption will increase, so we think the government may respond through a larger supplementary budget. By early-October the forex impact of whether or not the Fed raises rates and the broad picture for the Q3 economy should start to become visible.
