17 Nov 2015
BoJ Preview: Status quo likely to be maintained - BofAML
FXStreet (Delhi) – Research Team at BofAML, forecast that the BoJ will leave its policy framework unchanged again when they will hold a Monetary Policy Meeting (MPM) on 18-19 November.
Key Quotes
“Although it lowered its real growth and CPI forecasts at the previous meeting (30 October), it decided to leave its monetary policy framework unchanged. Since that meeting, economic data and market movements have been mixed, showing both positive and negative factors, so additional easing is not urgently needed.”
“Let us consider data on growth and inflation. The probability 3Q real growth will be zero or slightly negative has increased, and we see some signs that household expectations of inflation are declining. These factors raise the possibility of additional easing in our view. Among the items that will make up 3Q GDP statistics (16 November), those depending on household expenditure, such as consumption and housing, have firmed up, but inventory reductions will make a negative contribution to GDP, leaving the growth rate around zero (the current market consensus is a negative 0.3% QoQ annualized).”
“Data on 3Q industrial production and shipments suggest production declined more than shipments, which lowered inventory. In GDP statistics, four items comprise inventories: finished goods, work in process, raw materials, and distribution inventories. The inventories in industrial production statistics correspond only to finished goods, so we cannot make a conclusive judgment, but if inventories are greatly reduced in 3Q, the possibility of negative GDP growth cannot be ruled out. It appears the economy did not clearly rebound in 3Q after the negative growth recorded in 2Q (-0.3% QoQ, -1.2% annualized).”
Key Quotes
“Although it lowered its real growth and CPI forecasts at the previous meeting (30 October), it decided to leave its monetary policy framework unchanged. Since that meeting, economic data and market movements have been mixed, showing both positive and negative factors, so additional easing is not urgently needed.”
“Let us consider data on growth and inflation. The probability 3Q real growth will be zero or slightly negative has increased, and we see some signs that household expectations of inflation are declining. These factors raise the possibility of additional easing in our view. Among the items that will make up 3Q GDP statistics (16 November), those depending on household expenditure, such as consumption and housing, have firmed up, but inventory reductions will make a negative contribution to GDP, leaving the growth rate around zero (the current market consensus is a negative 0.3% QoQ annualized).”
“Data on 3Q industrial production and shipments suggest production declined more than shipments, which lowered inventory. In GDP statistics, four items comprise inventories: finished goods, work in process, raw materials, and distribution inventories. The inventories in industrial production statistics correspond only to finished goods, so we cannot make a conclusive judgment, but if inventories are greatly reduced in 3Q, the possibility of negative GDP growth cannot be ruled out. It appears the economy did not clearly rebound in 3Q after the negative growth recorded in 2Q (-0.3% QoQ, -1.2% annualized).”