Market expectations on BOJ monetary policy statement

BOJ has introduced its first QE programme by March 2001. Within just two years, the BOJ increased its monetary base by roughly 60 percent. A second, relatively small QE program was implemented in October 2010 and has gradually changed into the more aggressive intervention QE3 that began in April 4, 2013. BOJ is going to release its monetary policy statement tomorrow and traders will closely watch out the policy changes made by the Central bank to achieve 2% inflation target. 

If the BOJ were to go ahead with additional easing, one available option would be to increase purchases of not only risk assets, but also JGBs. According to BoFA Merrill Lynch, BOJ may increase in annual JGB purchases from 0.80tn now to about 0.100tn. If current purchasing operations are maintained, the BOJ will hold 50% of outstanding JGBs at end-2017 but if the BOJ decided to increase its holdings at the accelerated rate of 0.100tn annually, it would reach 50% of outstanding JGBs even sooner.