MNI BOJ Preview - October 2020: Moving Along

MNI POV (Point Of View):

• The Bank of Japan's November monetary policy decision should be a relatively straight forward affair, with the Bank set to leave it monetary policy settings unchanged, as the government has set itself up to deploy another (relatively modest) round of fiscal support.
• As such, the Bank is set to deem the COVID-19 fighting measures that it has deployed to date as ample, for now, and will leave the door open to doing more, if required, re-deploying its own brand of forward guidance.
• The update to the Bank's economic projections should ultimately be inconsequential for monetary policy, although the near-term CPI projections will probably be nudged lower.
• Looking ahead, the Bank will likely look to deepen its credit easing methods as the next step along the path of further easing, if required. Although an extension of the existing facilities is much more likely. Its active approach surrounding its JGB/Bill purchases will remain in place, with a focus on the shorter end of the curve. A deeper move into negative rate territory would likely only be forthcoming if there is a structural shift in real rate spreads with the U.S. or in the case of notable, sustained JPY strength.

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BOJ Preview oct 2020.pdf