The Bank of Japan will announce its June monetary policy decision and statement on Friday June 15

A couple of early previews:

Nomura:

  • We expect the BOJ to leave monetary policy unchanged. The all-Japan core inflation rate (CPI ex-fresh food) fell to 0.7% in April, indicating underlying weakness. We do not see this as a figure that will satisfy the BOJ, which has set a price stability target of 2%.
  • At BOJ Governor Haruhiko Kuroda's post-meeting press conference, we expect questions about whether additional easing is needed due to the inflation rate undershooting. However, Mr Kuroda has previously talked about the ongoing tightening in the macro output gap, and we believe he will state the view that the underlying uptrend in inflation will remain, while refraining from making a statement about the need for additional easing. Moreover, due to the Bank's decision to reduce purchases of long-term JGBs on 1 June, we expect questions about the aim of its reduction, how it interpreted the market's reaction to the decision, and the divergence between the target for the pace of long-term JGB purchases set by the BOJ (an annual increase of around JPY80trn in outstanding holdings) and its operation of monetary policy at present. We believe Mr Kuroda will state his position that intentions with regard to changes to monetary policy are not reflected in daily market operations and that the BOJ will persist with monetary easing.

Daiwa:

  • While the growth and inflation picture certainly appears weaker than the BoJ presented in its Outlook Report published following the Board's last meeting in April, a policy change seems very unlikely. And, while downside risks will be acknowledged, the BoJ will most likely maintain its constructive baseline outlook.
  • The post-meeting statement and Kuroda's press conference will nevertheless be scrutinized for any signs that the BoJ's confidence in the appropriateness of current policy settings has been eroded. And, at the very least, external member Kataoka will doubtless again call for additional easing.
  • Meanwhile, after the amount of purchases of JGBs of 5-to-10-year maturities was cut on 1 June, we suspect that the BoJ's JGB purchase target (officially still an annual increase of about ¥80trn in its holdings, while the actual rate at end-May was less than ¥50trn) and strategy will again come under scrutiny.