-BOJ
The BoJ is getting predictable. Japanese policymakers have entered a "wait-and-see" mode, as they are trying to be as accurate as possible in their assessments of the impact of the April's tax hike. Therefore, unless we see some extremely disappointing data, the central bank is likely to stick to the chosen course.
In a widely expected move the Bank of Japan held tight its already loose monetary policy, with the pledge to keep injecting 60-70 trillion yen per year in a bid to end decades of deflation. The decision comes despite the updated forecasts that showed inflation is likely to ease to 1.25% and stay there for some time– a far cry from the BoJ's 2% target level. Trying to lower the public debt levels, which are currently around 240% of the Japan's GDP, the government raised its consumption tax from 5% to 8% and, according to the latest projections, the BoJ will be under the pressure to ease its monetary policy further in late third quarter of this year, as they realise the inflation is undershooting their target.
While the BoJ left its assessment of the domestic economy, it lifted the view on foreign economies for the first time since January. It means the BoJ is cementing its bullish view, expecting exports to pick up in the foreseeable future on the stronger demand from Japan's trading partners.
© Dukascopy Bank SA