The world of central banking has gotten a little dull, lately, after a historic 2012.The ECB seems to be in neutral. The Fed’s policy seems fairly clear cut.
The centre of action is Japan, where expectations of more easing (fiscal and monetary) has sent the Nikkei on a rocket ride since mid-November.
The Bank of Japan has started a two day meeting, and the actual result will come sometime tomorrow. Everyone expects an increase in the inflation goal.
Here’s a preview from Nomura:
We expect the BOJ to introduce the 2.0% inflation target desired by the government. We also expect further easing measures consistent with raising the inflation target from the previous “goal” of 1.0%. The size of the asset purchase fund could be increased (mainly JGBs), or an open-ended scheme could be introduced, scrapping the time limit and ceiling for asset purchases as the BOJ bows to government and market expectations. Prime Minister Abe has also mentioned a jobs target and a public-private fund to buy foreign bonds, but we doubt the BOJ will go that far straight away. If it does decide on bolder easing measures, we think it is more likely to increase its “rinban” JGB-buying operations. This would keep in check the level of risk assets on the BOJ’s balance sheet and allow it to buy a wider range of JGBs. In that case, the BOJ’s banknote rule could be temporarily frozen.
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