BoJ is likely to ease further in April

The Bank of Japan (BoJ) will hold two monetary policy meetings in April - 7-8 April and 30 April. No policy action is expected during 7-8 April, but the central bank will ease further at the 30 April meeting, when the board conducts its semi-annual GDP and inflation forecast reviews. 

The BoJ launched quantitative and qualitative monetary easing (QQE) on 4 April 2013 in an attempt to achieve its 2% inflation target in about two years. It slashed GDP and inflation forecasts, and announced expanding QQE on 31 October 2014, to prevent the likely return of a deflationary mindset as sharply lower global oil prices put downward pressure on Japan's domestic prices.

Standard Chartered says they think it is becoming more difficult for the central bank to achieve its inflation target. Core inflation slowed to pre-QQE levels in February 2015. The BoJ had expected this, but believes the slowdown is temporary. Key Q1 economic data suggests that the recovery momentum has fallen short of market expectations.

"We see a growing urgency for the BoJ to step up monetary easing on 30 April. We expect it to add JPY 10tn more (at least) to its current asset purchase programme, increasing total annual asset purchases to JPY 90tn . It would also need to reconsider the timeframe in which it plans to meet the inflation target", added Standard Chartered

The risk to our call is the BoJ delaying its move to later this year. That said, it is facing increasing pressure domestically on concerns about the effectiveness of and the need for further easing. 

The BoJ may want to wait to see how rising wages boost consumption and how rebounding oil prices could affect inflation expectations. However, it has a clear mandate to achieve the 2% inflation target, and it is believed that a move on 30 April would be best.