Additional QQE measures to be decided in BoJ's next meeting

At the 30 October meeting, the BoJ will publish its new semi-annual report on economic and inflation projections. The FY16 inflation projection will likely be revised down sharply from +1.9% and the central bank may finally admit that the 2% target will be difficult to achieve within the indicated timeframe. 

The BoJ is likely to push back the current timeframe of "in or around FY16" (this includes the first half of FY17) and will probably implement additional QQE to make sure that the 2% target is achieved. 

"With regards to additional QQE measures, the BoJ is expected to increase the annual monetary base target to ¥85trn on an annual basis, up from ¥80trn, with the increase mainly directed at risk assets, including ETFs (about ¥3trn yen). The rest is likely to be newly directed at FILP agency bonds and/or increasing the JGB purchases by slightly extending the average remaining maturity of JGBs (currently 7-10 yrs)", says Societe Generale. 

Thus, it is likely to stress the importance of quality rather than quantity. Given that the government is likely to declare a successful exit from deflation by the time the upper house election is held next summer, the  next QQE measure will probably be the last one in the current monetary cycle.