The Bank of Japan wrapped up its two-day monetary policy meeting today, and as expected it made no change to its current policy.
“The BoJ will continue to conduct money market operations so that the monetary base (¥173.3trn as of end-July) will increase at an annual pace of about ¥60-70trn to reach around ¥200trn by end- 2013 and ¥270trn by the end of 2014,” said Societe Generale’s Takuji Alda and Kiyoko Katahira in a note to clients.
However, BoJ head Haruhiko Kuroda stressed the importance of fiscal discipline.
“Ending deflation and raising the sales tax are achievable at the same time,” said Kuroda according to Bloomberg’s Toru Fujioka and Masahiro Hidaka. “Restoring fiscal health is absolutely necessary and important by itself, but once fiscal discipline is loosened, it’s true that that will indirectly make a negative impact on monetary measures.”
For now, the big question is how long will the BoJ stay on its current path before making any changes.
“We think that the best timing for the BoJ to strengthen its QE is when the effect of current QE on the USD/JPY fades out,” said the SocGen analysts. “We believe the most likely timing for the next BoJ move is Q2 2014, or perhaps even earlier (Q1 2014).
Toru Fujioka & Masahiro Hidaka