In line with our and consensus, Bank of Japan (BoJ) kept its monetary policy on hold with the short-term interest rates at -0.1%, 10-year bond yields cap at “around zero” and continue buying assets at a pace of ¥80tn. The central bank maintained its headline inflation projection, predicting to hit 2% in the fiscal year 2019/2020 while lowered slightly the core inflation projection.

We believe the optimism from BoJ’s inflation forecasts indicates the economy is on track. The economy has grown for six consecutive quarters with the momentum likely to sustain. While we feel the economy does not need extra monetary stimulus for now, it also indicates that BoJ is not in a hurry to tighten its monetary policy. The reason being, price pressures are expected to strengthen only slowly. We expect the current monetary policy to stay until end 1H2018.

• In line with our and consensus, Bank of Japan (BoJ) kept its monetary policy on hold. But BoJ made a slight downgrade to inflation forecasts while predicted steady economic expansion. The short-term interest rates was left at -0.1% and a cap on 10-year bond yields at “around zero” and pledged to carry on buying assets at a pace of ¥80tn a year in a move to end two decades of on-and-off deflation.

• Consumer prices are expected to be up by 1.8% in fiscal year 2018/2019, unchanged from the previous forecast. Also, it forecast for inflation to hit 2% in the fiscal year 2019/2020. But it now expects core consumer prices to grow 0.8% in the fiscal year 2017/2018, lower than the previous projection of 1.1% and trimmed its forecast from 1.5% to 1.4% for the year to March 2019,

• We believe the optimism from BoJ’s inflation forecasts indicates the economy is on track. The economy has grown for six consecutive quarters with the momentum likely to sustain. While we feel the economy does not need extra monetary stimulus for now, it also indicates that BoJ is not in a hurry to tighten its monetary policy. The reason being, price pressures are expected to strengthen only slowly. We expect the current monetary policy to stay until end 1H2018.

Source: AmInvest Research - 1 Nov 2017