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21 Feb 2014
BoJ minutes indicate concerns over recovery risks - could further easing be on the cards?
FXStreet (London) - Risk was supported over the Asian session following the release of the minutes from the Bank of Japan’s January 21-22 monetary policy meeting. The minutes showed some concerns over the pace of the Japanese recovery, but was bullish that it would achieve its inflation target.
“Japan's economy has continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed. Overseas economies -- mainly advanced economies -- are starting to recover, although a lackluster performance is still seen in part,” said the minutes.
At the meeting, the Bank of Japan had stated that it would keep its monetary expansion at an annual pace of JPY60-70 trillion as the central bank targets a 2 percent inflation rate.
"The Bank will continue with quantitative and qualitative monetary easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate,"
With poor GDP and industrial production data released earlier this week and an increasingly precarious trade balance position, the Bank of Japan’s concerns have hiked bets that we will see another intervention from the Bank of Japan. Its current easing programme stands at JPY7trillion a month, however with recent data indicating that the expected increased spending ahead of the April sales tax hike failed to materialise, policymakers could be poised to step in to try to maintain Japanese momentum.
With little in the way of US data on the cards before the weekend, its unlikely we will see a significant shift in momentum – existing home sales are the only release on the cards, with expectations of a 5.5 percent decline. However, this will likely be written off as part of the poor US weather conditions that have become a catchall excuse for poor US data through January and February.
“Japan's economy has continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed. Overseas economies -- mainly advanced economies -- are starting to recover, although a lackluster performance is still seen in part,” said the minutes.
At the meeting, the Bank of Japan had stated that it would keep its monetary expansion at an annual pace of JPY60-70 trillion as the central bank targets a 2 percent inflation rate.
"The Bank will continue with quantitative and qualitative monetary easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate,"
With poor GDP and industrial production data released earlier this week and an increasingly precarious trade balance position, the Bank of Japan’s concerns have hiked bets that we will see another intervention from the Bank of Japan. Its current easing programme stands at JPY7trillion a month, however with recent data indicating that the expected increased spending ahead of the April sales tax hike failed to materialise, policymakers could be poised to step in to try to maintain Japanese momentum.
With little in the way of US data on the cards before the weekend, its unlikely we will see a significant shift in momentum – existing home sales are the only release on the cards, with expectations of a 5.5 percent decline. However, this will likely be written off as part of the poor US weather conditions that have become a catchall excuse for poor US data through January and February.