Reuters reports, citing sources familiar with the central bank's thinking


The report says BOJ officials are divided on whether to ease monetary policy next week or hold off on action with no consensus within the central bank yet on the preferred move. Adding that much will also depend on the ECB's policy decision and the market response.

The sources cited say that the BOJ would prefer to save its limited ammunition for when the economy faces bigger problems but are worried that by standing pat at a time the Fed and ECB are cutting rates or signaling to do so, it would spark further strength in the yen and compound woes seen in Japanese exports this year.

Further details reveal that the BOJ is also worried that adjusting its forward guidance may not be enough to appease markets as well:

"Pledging to keep rates low longer won't be that effective when markets already expect the BOJ to keep ultra-low rates for years. Markets may interpret it as a sign that the BOJ is running out of ammunition, which is not good."

If anything else, this goes to show that it is truly a race to the bottom now between central banks around the world. No major central bank can afford to just sit around and wait/contemplate their future policy decisions.

With the Fed pressured into acting already next week, other central banks will be keen to turn things into their favour again by spinning out further dovish remarks and signalling more dovish policy decisions moving forward.

I reckon that in turn may very well cause the dollar to be the best of a bad bunch (again). And that won't go down well with Trump surely. Hence, there will be more pressure on the Fed and the cycle keeps repeating.