BoJ keeps monetary policy unchanged

The Bank of Japan (BoJ) opted to leave its monetary policy unchanged this morning was expected. It also remained optimistic that the Japanese economy is now slowly but steadily gathering momentum. However, that does not mean that this will also be reflected in the prices any time soon. The BoJ was once again forced to lower its inflation outlook - albeit slightly. 

Commerzbank notes, the Bank of Japan now expects inflation of 0.7% for the current fiscal year (i.e. April 2015 to March 2016). At the same time it expects the inflation rate to remain close to 0%. 

Based on the BoJ's expectation, analysts anticipates inflation to rise notably at some stage during the second half of the year (i.e. as of autumn 2015). 

"The current inflation data is certainly not demonstrating any signs of sustainable inflation momentum. And the Japanese central bank is not the only one anymore to face the problem that inflation does not simply appear out of nowhere. We still see the risk that towards year-end the BoJ will have to increasingly look at measures of weakening JPY in order to fuel inflation. However, at present this is not an issue and JPY investors are mainly focussing on the US. The JPY side of things is unlikely to provide any momentum at present", according to Commerzbank.