BOJ expected to hold fire this week

18 September, 2019 12:00 AM printer

TOKYO: The Bank of Japan will leave monetary policy unchanged this week as easing trade tensions and calmer financial markets relieve some of the pressure to act, a Bloomberg survey suggests.

About three quarters of 48 economists said the BOJ will leave policy unchanged at the end of a two-day meeting Thursday, hours after the Federal Reserve is forecast to cut interest rates. The European Central Bank last week cut rates and revived bond purchases, part of a global policy shift that has raised expectations the BOJ will follow suit, report agencies.

Still, nearly half of analysts surveyed said the BOJ would add monetary stimulus in some form either this week or at its meeting in October, with the number evenly divided on the timing at 23 percent each.

A strong and growing majority of BOJ watchers — 83 percent in the latest survey — now see additional stimulus as the BOJ’s next policy step, though they have different opinions on what forms it would take and even whether certain moves would amount to stimulus.

About a third of those surveyed said the BOJ would strengthen its pledge to keep interest rates extremely low this week, while 21 percent said it would widen the targeted trading range for the 10-year yield on Japanese government bonds.

Analysts also see a growing chance that the BOJ will lower its negative interest rate on some bank reserves from the current -0.1 percent, with 23 percent predicting it would happen by the end of the year. That’s up from 6 percent in July.

Gov. Haruhiko Kuroda said following the last policy meeting in July that the BOJ has become “more positive” about adding stimulus, reinforcing market expectations for action.

The BOJ has plenty of reasons to be ready. While tensions have eased lately, the U.S.-China trade war looks likely to keep weighing on Japan’s exports, as does a slowdown in the global economy. A sales-tax hike due to take effect in Japan next month raises concerns about domestic consumption.

Risks from the trade war and global economy were cited by 40 percent of analysts as the BOJ’s biggest worry, with 21 percent pointing to a strong yen and 19 percent saying the policy actions of other central banks.