Preview of the BOJ from Goldman Sachs, BoA/Merrill Lynch & Barclays

Via eFX

The following are the expectations for todays BoJ meeting as provided by the economists as Goldman Sachs, Bank of America Merrill Lynch, and Barclays Capital.

GS:

  • In Japan, our resident Economics Team expects extensions in the quantitative and qualitative monetary easing scheme to be announced not on this occasion, but at the December meeting.
  • The BOJ will also release its Outlook Report (Outlook for Economic Activity and Prices).
  • The BOJ under-estimated the pullback after the consumption tax hike and clearly needs to cut its FY2014 forecast sharply.
  • However, we expect only a cut to +0.5% – +0.6% (consensus +0.3%) from the current +1.0% in the October Outlook Report.

BofA:

  • The BoJ is likely to lower its FY14 growth forecast, but still expect growth to be close to or slightly exceed the potential growth rate (which the BoJ probably considers to be 0.5%) and maintain its expectation that growth will return to a recovery path that exceeds the potential growth rate in FY15.
  • A downward revision of the FY14 growth forecast would mean a slower narrowing of the output gap than originally expected.
  • However, since the BoJ is of the view that the economy is close to full employment, we do not expect it to substantially revise its inflation forecasts (1.3% in FY14 and 1.9% in FY15; excluding the impact of the consumption tax hike).

Barclays:

  • The BoJ is sharply above Barclays and consensus in its FY14 real GDP forecast, and we expect it to reduce its forecast to about 0.5% (from 1.0% as of July).
  • We believe it could also lower its FY14 core CPI forecast to about 1.1% from 1.3%, reflecting lower oil prices, while continuing to convey confidence in its CPI outlook for FY15, partly to anchor expectations for 2% inflation “in or around” that horizon.
  • We expect the BoJ to refrain from further easing, opting simply to continue with QQE (keeping the monetary base on the current trajectory) until the CPI stabilizes at 2%.
  • In doing so, we believe it will officially drop any reference to the two-year time horizon for achieving its price target and refrain from setting new calendar-based targets for the monetary base once the current ones expire at end-2014.

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ps. I am expecting the BOJ announcement sometime after 0230GMT … but closer to 0330GMT given it’s a one-day meeting