Policy Unchanged, Tweaks View On Economy

The BoJ left its monetary policy settings unchanged, as expected, with board member Kataoka providing the usual source of dovish dissent. Meanwhile, the Bank downgraded its overall economic assessment. It still believes that the economy has picked up as a trend, although it notes that COVID has played into some of the weakness seen, while stressing that future developments surrounding the Russia-Ukraine conflict warrant “attention.” The Bank now believes that the pickup in private consumption “has paused.” On the labour market front, the Bank notes that the employment and income situation has remained “relatively weak,” although some improvements were seen. The BoJ ultimately expects the economy to recover from the rise in commodity prices, with the uptick in inflation expectations characterised as moderate, and a “clear” increase in inflation deemed likely in the near term owing to energy price dynamics, raw material cost increases and a dissipation of the impact of the reduction in mobile phone charges. There were no meaningful surprises in the text of the release. Onto the post-meeting press conference, which should be inflation-focused, with expectations for questions surrounding JPY weakness also evident (don’t expect much in the way of fireworks on the currency front given the relatively orderly and fundamental-driven nature of the move).