Midday brief – Earnings Season continues

The new Bank of Japan governor will chair his first policy meeting this week on April 27-28, while the board of the central will offer fresh quarterly growth and price forecasts extending through to 2025.

Most of the analysts that have commented on this policy meeting expect new governor Udea to keep rates unchanged but to make subtle hints that he intends to deviate from former governor Kuroda’s policies.

Deutsche Bank are expecting monetary policy ‘revision’ from the Bank of Japan meeting this week. And the expects the BOJ to undergo a policy revision on the back of inflation risks, with potential outcomes including.

The bank notes the three areas they expect to see changes are the termination of YCC, the strengthening of forward guidance on short-term rates, and greater flexibility of JGB purchasing operations.

At the last meeting, the central bank also made no tweaks to yield curve control including a 0.5% cap set for bond buying, tempering views that the side effects of the policy need to be addressed soon.

The Bank of Japan also kept its key short-term interest rate unchanged at -0.1% and that for 10-year bond yields around 0% during its March meeting by a unanimous vote.

Meantime, policymakers indicated their concerns over the economy by lowering their views on exports and production while leaving the overall economic assessment unchanged.

The BoJ reiterated at the March meeting that it would take extra easing measures if needed while expecting short-and long-term policy interest rates to stay at their present or lower levels.

The annual inflation rate in Japan inched down to 3.2% in March 2023 from 3.3% in the previous period. It was the lowest point since last September, as transport costs rose the least in 6 months.

Meanwhile, consumer prices went up 3.1% yoy in March, the same as in February, matching forecasts but staying above the Bank of Japan’s 2% target for the 12th month. On a monthly basis, consumer prices rose by 0.3%, shifting from a prior 0.6% fall.

I expect Kuroda’s successor, Kazuo Ueda, will take inflation seriously, and start to pave the way for rate hike at some point this year, possibly in the summer.