Any change in BoJ’s inflation outlook?

The Fed refrained from hiking interest rates at the 16-17 September FOMC meeting, and does not expect to attain its 2% inflation goal until 2018 according to board members' median forecast. The BoJ will have two policy meetings in October, and it will release its Outlook for Economics Activity and Prices on 30 October. 

"While BoJ Governor Haruhiko Kuroda's optimism did not appear to waver at the press conference after 15 September meetings and the BoJ maintains its outlook for 2% inflation in 2016, the FOMC result affects on BoJ's inflation outlook will be monitored", says Bank of America. 

Although additional easing is not mainly expected, the BoJ's downward revision of its inflation outlook could increase its probability. If it does opt for additional easing, given it will be difficult for it to significantly increase the quantity of its JGB purchases and that any further declines in already low JGB yields would likely have limited impact.

"Rather than pursuing greater quantity, the BoJ is more likely to strengthen qualitatively, such as by lengthening the maturities of JGBs it purchases, increasing its ETF purchases, and buying new types of financial assets. But increasing its JGB purchases by ¥10-20tn cannot be denied from previous experience, and it might lead to bull flattening in the JGB curve", added Bank of America.