Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive Summary:
- BoJ expected to leave its monetary policy settings unchanged
- Governor Kuroda has recently noted that medium- to long-term inflation expectations do not show signs of rising
- 10y breakevens at the highest level since mid ’15, but are still operating at less than 50% of inflation target
Given the BoJ’s continued (and understandable) insistence that current inflationary pressures are cost-push not demand-pull related, we expect the Bank to leave its monetary policy settings unchanged at the end of its April monetary policy meeting.
Figure 1: USD/JPY Implied Vols at highest since COVID
Source: MNI/Bloomberg
Ultimately, wage growth remains limited in Japan, which hampers the development of sustainable underlying inflationary impulse, while BoJ Governor Kuroda has recently noted that medium- to long- term inflation expectations do not show signs of rising. Note that Japanese 10-Year breakevens sit at the highest level observed since mid ’15, but still print shy of the 1.0% level i.e. operating at less than 50% of the BoJ’s inflation target, with a similar dynamic observed in Japanese 5-Year/5-Year inflation swaps.
As such, Kuroda recently reaffirmed the need for continued monetary easing, with a commitment to overshooting the Bank’s inflation target given the elongated period of sub-target price rises.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.