MNI BoJ Preview - March 2022: No Change, Increased Risk

EXECUTIVE SUMMARY

• The BoJ will leave its policy settings unchanged at its March meeting, with the uncertainty surrounding the Russia-Ukraine conflict and the resultant spiral in global energy prices set to produce increased focus on downside risks, if not a downgrade to the Bank’s overall economic view.
• The Bank will also assess the recent JPY weakness, although Governor Kuroda has previously pointed to some of the benefits of a weaker currency, while the Bank’s hands are tied in an immediate sense. Furthermore, the weakness has been relatively orderly and driven by fundamentals, so don’t expect much in the way of fireworks here.
• The bulk of the post-meeting press conference should focus on inflation, with the Bank insisting that it needs to push on with its monetary easing given the nature of the current inflationary shock, coupled with a lack of meaningful wage growth and still limited medium- to longer-term inflation expectations.
• A hawkish turn remains some way off.
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