More QQE measures from BoJ likely on 30 October

The latest Q3 BoJ Tankan survey showed that the current business conditions DI for large manufacturers of Japan fell to 12 in Q3 from 15 in Q2. This is mainly because of weak exports to China and ASEAN economies despite a firm economic recovery in the US. The Q4 outlook DI for large manufacturers fell to 10, indicating that business conditions are likely to weaken further, foresees Societe Generale. 

In the October monthly economic report published by the Cabinet Office, the assessment is likely to be revised down from "The Japanese economy is on a moderate recovery, while slowness can be seen in some areas." (as of September 2015) to "The Japanese economy is on a moderate recovery path, while weakness can be seen recently." Thus, the assessment is likely to be changed from "slowness" to "weakness", which will correspond to the assessment as of October 2014 when the BoJ implemented additional QQE last time.

The BoJ's overall economic assessment in September is explained as "Exports and industrial production have recently been more or less flat, due mainly to the effects of the slowdown in emerging economies." After seeing the weak August production data, the BoJ could revise down this assessment in the 7 October policy meeting, probably to match with the assessment as of October 2014 when it implemented additional QQE measures. 

"In addition, the September production data (to be announced on 29 October) is expected to be weak. If this materialises, there is an increased possibility that the BoJ may implement additional QQE measures at its following meeting on 30 October, although we cannot rule out the possibility that it may decide to implement these measures at the 7 October meeting", argues Societe Generale.