BoJ left scant room for an adjustment in monpol in either direction - Barclays

Analysts at Barclays provide their afterthoughts on yesterday’s Bank of Japan (BoJ) monetary policy decision.

Key Quotes:

“The BoJ, as widely expected, voted to maintain its current monetary policy stance at today's monetary policy meeting.

The sharp disparity between the robust economy and sluggish prices (flattening in Phillips curve) leaves scant room for an adjustment in monetary policy in either direction.

Policy board member Goushi Kataoka, a keen QE advocate, dissented as in the previous meeting on the grounds that the present easing is insufficient to achieve the bank's inflation target.

However, he did not put forward an official proposal, and his arguments conversely only served to highlight the limitations of monetary easing.

We believe the BoJ will maintain its monetary easing via QQE+YCC in 1H 2018 on continued stagnation in CPI inflation.

Subsequently, we anticipate mounting speculation of a revision in YCC in 2H

The BoJ will face numerous challenges in its monetary policy and operations as it moves to adjust YCC and normalize policy, including a redefinition of its inflation target and balance sheet adjustments.”