As expected, the Bank of Japan (BOJ) left the monetary policy unchanged by holding its short-term interest rate at -0.1% and 10-year government bond yields at around 0%. The current monetary policy is expected to support the moderate economic growth. Importantly, the BOJ issued a more downbeat assessment on the potential economic performance as a broader global slowdown impacts exports and production

We expect the BOJ to continue insisting the economy is on a pace of moderate recovery, unless it is able to see clear signs of heading into recession. And we expect additional easing is fairly high in the cards. It can happen in 2020 when global economy faces a downturn.

• As expected, the Bank of Japan (BOJ) left the monetary policy unchanged by holding its short-term interest rate at -0.1% and 10-year government bond yields at around 0%. The current monetary policy is expected to support the moderate economic growth. Importantly, the BOJ issued a more downbeat assessment on the potential economic performance as a broader global slowdown impacts exports and production

• The BOJ faces a dilemma. It has been printing money heavily and soaked up market liquidity while hurting commercial banks’ profits. Still, inflation remained subdued. It has now left the BOJ with little ammunition to battle the next recession. While the BOJ is still looking at a 2% inflation to be its main priority, we are of the view that the target remains a far cry. A 1% target remains more realistic.

• We expect the BOJ to continue insisting the economy is on a pace of moderate recovery, unless it is able to see clear signs of heading into recession. And we expect additional easing is fairly high in the cards. It can happen in 2020 when global economy faces a downturn.

Source: AmInvest Research - 18 Mar 2019