"He seems to be just ready to sit, wait, watch"
- Sean Callow, strategist at Westpac Banking Corp
According to minutes from the Bank of Japan's June 12-13 meeting, board members agreed that the current pace of asset purchases is having a desired effect in fuelling inflation and pulling the country out of 15-year long deflationary spiral, but with the central bank's inflation target still far away from sight economists believe that the BoJ will need to expand its quantitative easing programme. The quantitative and qualitative easing (QQE) scheme, which began last April, is designed to expand the monetary base at an annual pace of ¥60-70 trillion, helping to create inflation and boost economic growth. Minutes also showed that the current pick up in CPI was around 1.25%, excluding the impact of the consumption tax increase, and is likely to remain at this level for some time. Moreover, the BoJ Governor eased his stance toward the stronger Yen. While the nation's currency has gained 4% versus the U.S. Dollar this year to trade at 101.22, Kuroda said he is satisfied with the current exchange rate, noting that the Yen is no longer excessively strong.
On top of that, the BoJ policy makers agreed that that geopolitical risks posed by Ukraine and Iraq need to be monitored closely, and tough global competition and moves to produce locally for consumers are undermining exports.
© Dukascopy Bank SA