BOJ likely to hold policy tomorrow

Bank of Japan (BOJ) will announce its monetary policy decisions tomorrow sometime in early Asian hours. Speech by Governor Kuroda is expected to be scheduled at 3:00 GMT.

Current monetary policy -

• BOJ is holding policy rates near zero at 0.1% and pursuing monetary easing through asset purchase (Govt. Bonds, ETFs,REITs) since 2012 and has increased the pace of purchase to ¥ 80 trillion per annum in last October.

• This massive rate of purchase has pushed Central bank's balance sheet to record high which is a major concern in GOJ (Government of Japan) bond market.

Policy expectation -

• BOJ policymakers are most likely to hold policy steady, might provide crucial cues with their new forecasting approach.

• BOJ Governor Kuroda's speech is of high importance, since it might provide further clues what BOJ might be thinking to counter headwinds from Greece and China.

Division among policymakers -

• BOJ board remains heavily divided. Last action came with 5 member voting in favor while 4 opposed further purchase increase in October 2014.

• BOJ policymakers Mr. Kiuchi has been constantly voting in favor of reducing purchase in tune of 40-50 trillion Yen.

Impact on Yen?

• Yen might gain over Dollar, however not much is expected as FOMC looms on Thursday.
  
  
• Several key concerns for BOJ - Excessive strengthening of Yen over Risk aversion, Weak recovery in Japan, China's slowdown, looming sales tax hike.
  
• Some prominent names such as Goldman Sachs, are predicting further easing from BOJ, however most (including us at Econotimes) that BOJ is unlikely to move tomorrow before FED meeting.

Yen is currently trading at 120.3 against Dollar.