At first glance there isn’t much to shock when it comes to the latest BoJ decision, with the usual 8-1 vote split (Kataoka being the usual dovish dissenter) as the Bank left its monetary policy settings unchanged. Its headline and core CPI forecasts were marked higher alongside a downgrade to the GDP projection covering the current FY (as expected). Note that the BoJ maintained its forward guidance surrounding interest rates, while tweaking its wording surrounding the overall economic assessment and inflationary picture in the wake of its forecast adjustments. The Bank did note that inflation expectations have risen, while it highlighted the risks that FX market gyrations and commodity price moves could have on inflation.
Fig. 1: Major Economic Forecasts From The BoJ’s Outlook for Economic Activity & Prices
Source: Bank of Japan
- Note that regular references to recent JPY movements (coupled with the previously alluded to comments surrounding the risks that FX market moves could pose to inflation), including phrases such as “sharp fluctuations in FX markets have been observed” and the BoJ stressing that it needs to pay attention to the impact of FX movements on the economy seemed to create some mild volatility in JPY crosses. However, there wasn’t much in the way of new information in those phrases, which allowed USD/JPY to retrace to pre-decision levels after operating in a ~50 pip range around the decision.