BOJ Likely to Cut Forecasts but Maintain QE Unchanged

The Bank of Japan concludes a two-day policy meeting on Tuesday amid intense speculation that it may adjust its massive monetary stimulus program. Economists who study the BOJ closely say such talk is premature.

Investors should brace for volatility in markets whatever the outcome. The central bank has been forced to conduct fixed-rate operations three times this month to curb rising yields on benchmark 10-year Japanese government bonds, the yen is primed to strengthen on any signs of tighter policy and some traders have placed bets on the possibility of changes to the BOJ’s stock purchases.

Governor Haruhiko Kuroda has stared down markets before, including in January when suggestions of normalizing policy emerged. All 44 economists surveyed by Bloomberg expect him to hold firm again on Tuesday given the weakness in inflation. If he does, the gulf will widen between the BOJ and its peers the U.S. Federal Reserve and the European Central Bank, which are winding back crisis-era settings.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza