The Bank of Japan (BoJ) will be concluding its two-day policy meeting today, with the next one scheduled at the end of the month. Although 17 out of 36 economists are expecting the central bank to announce additional easing in October, only two predict that the announcement will come after this meeting. (Bloomberg)
 
Nikkei led the region
Yesterday, Japanese stocks led the region higher as investors hope that there will be a new stimulus from the BoJ. The Nikkei index which dipped below 17,000 last Tuesday, has since rebounded 7.4% after five consecutive days of gains.
 
Weak data increases speculation on further easing
Economists are predicting that there will be more asset-buying in Japan due to economic data released recently. Industrial production fell month on month, adding on to indications that the world’s third largest economy is in a technical recession. Business confidence has also worsened while wage growth slowed.
 
In addition, core consumer prices fell in August, the first annual drop since the BoJ started its massive stimulus programme more than two years ago. The economy shrank in the second quarter of this year and economists are expecting a further decline in the third quarter.
 
Coupled with hitting its ambitious 2% inflation target by September 2016, more economists have brought forward their forecast for further easing.
 
Easing expected on 30 October 2015
While an easing is unlikely to happen after its policy meeting today, fears of a recession will keep the BoJ under pressure to ease at the next meeting on 30 October. It is also then that the central bank is expected to cut its long-term economic and price forecasts.
 
According to the Financial Review, “policymakers are preferring to hold fire at least until they make a more thorough assessment of the outlook on October 30.”
 
After the BoJ concludes its policy meeting today, it is widely expected to maintain its pledge to increase base money at an annual pace of 80 trillion yen through aggressive asset purchases.

Source: Macquarie Research - 7 Oct 2015