ANZ on the Bank of Japan monetary policy board meeting, and looking ahead … complications

ANZ's preview of the BOJ meeting on January 22 and 23 notes that the board is in a bind. But, first what to expect:

• meeting will not result in any change in policy
• the board will downgrade inflation forecasts and remain dovish

Looking ahead,

• we think that the stalled selloff in global rates could create complications; narrower differentials and slower asset purchasing may prompt the board to look for new easing options.
• Recent economic and financial market developments have not favoured the BoJ's 2% inflation goal. The growth pulse has been disappointing, with Q1 and Q3 2018 GDP falling. So the BoJ's output gap measure has become less positive, while the Cabinet Office's measure has returned to being in deficit. As a consequence, underlying price pressures are likely to moderate, and the recent strengthening of the JPY and decline in oil prices will have an disinflationary impact on the CPI.