BOJ's next move likely to be withdrawal of stimulus- Reuters poll

Marco Green
January 21, 2020

The Bank of Japan began a two-day policy meeting Monday and was widely expected to keep its ultraeasy monetary policy in place and upgrade its growth outlook for the next fiscal year.

The central bank is also expected to raise its economic growth forecast for the first time in a year and keep its inflation forecasts unchanged for the first time in two years.

But the central bank will likely persist with normalization in the broad sense as it continues to taper its asset purchases.

The BOJ is expected to release its policy statement and its economic forecasts on Tuesday.

"Japan's economy has been on a moderate expanding trend. although exports, production and business sentiment have shown some weakness, mainly affected by the slowdown in overseas economy and natural disasters", it said.

The decision also followed a fresh trade deal clinched between the United States and China, easing a concern that had long anxious global investors.

As for prices, however, the BOJ is likely to leave its inflation forecasts below its target despite the tax hike.

The core CPI, excluding volatile fresh food items, rose only 0.5 percent in November from a year earlier.

The momentum toward achieving the price target "is maintained but is not yet sufficiently firm", the bank also said.

BoJ governor Haruhiko Kuroda will address the media later in the day.

The central bank stood pat on solid stock prices in Tokyo, with the benchmark Nikkei hitting Monday a 16-month high amid signs of stable growth in the USA economy, one of the biggest destinations for Japanese exports.

It will also likely hold off from cutting rates further, given the yen's recent stability against the dollar after the U.S. Federal Reserve past year hinted at pausing its rate reduction scheduled after three consecutive cuts.

Other reports by Click Lancashire

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