BoJ signals no imminent easing

The Bank of Japan (BoJ) as expected announced no new easing measures in connection with the monetary policy meeting held today. 

The target for expansion of the monetary base (currently the main policy instrument) was maintained at JPY80trn annually. 

The decision was approved in a 8-1 vote. Board member Kuichi was again the dissenter, arguing that the BoJ's asset purchases are too aggressive and there should be more flexibility in reaching the 2% inflation target.

In the statement there were only a few small changes to the wording on inflation. The phrase describing the near-term outlook for inflation was changed to "the year-on-year rate of increase in CPI is likely to be about 0 percent for the time being, due to the effect of the decline in energy prices" from "the year-on-year rate of increase in the CPI is likely to slow for the time being".

The new wording still leaves room for inflation to decline in the coming months without the BoJ responding with more easing. 

Danske Bank notes its views as follows...

• In our view, the BoJ is also starting to signal more flexibility in the time frame forreaching the 2% inflation target. 
  
  
• Our current forecast suggest that the 2% inflation target could be within reach in early 2016, but it depends crucially on oil prices.
  
  
• We do not expect additional easing from the BoJ but on the other hand the currentaggressive pace of expansion in its balance sheet is unlikely to be reduced in 2015. 
  
  
• In our view, financial markets probably underestimate the risk that the BoJ will start tapering atsome stage in 2016.