Barclays say the risk of a change to monetary/fiscal policy has emerged with the decline in the approval ratings of the Abe administration.

They point out what has been obvious on this:

  • Over the short term, we see a risk that the administration will lean toward more accommodative policy in a bid to restore those ratings.

But go on:

  • Even if the BoJ should feel pressure to ease further on a downshift in CPI inflation or accelerated share price declines/JPY appreciation, its options may be limited.


  • Although extreme easing contrary to the normalization trend elsewhere may be unlikely due in part to the potentially large side-effects, it still warrants attention as a tail-risk scenario, in our view.
  • Policy Board changes might bring a near-term adjustment to the BoJ's shift from quantity to rates and from long-term to short-term sectors (in relation to market operations), while a change of government leadership (or mounting prospect thereof) might give the BoJ more leeway to normalize.