Goldman Sachs and Bank of America pushed back their call for when the next policy change from the Bank of Japan is likely to come, after Governor Kazuo Ueda continued with a largely dovish message at his first policy meeting Friday.
(Bloomberg) — Goldman Sachs and Bank of America pushed back their call for when the next policy change from the Bank of Japan is likely to come, after Governor Kazuo Ueda continued with a largely dovish message at his first policy meeting Friday.
Economists at Goldman and Bank of America now have a base-case forecast for the central bank to adjust its yield curve control program in July, after previously seeing it coming in June, according to their reports. They expect the BOJ to switch its yield target from the 10 year to 5 year.
Barclays and UBS are also taking similar action after Ueda reinforced his stance of continuing with monetary easing at the end of last week, bringing the yen to its weakest level in 14 years against the euro.
The analysts’ quick reassessment of the BOJ’s policy outlook suggests June may no longer be the most popular timing for BOJ action. A Bloomberg survey earlier in April had shown next month to be the favorite.
“Judging from Ueda-san’s comments, I think they want more data,” said Izumi Devalier, economist at Bank of America Securities. “From that perspective, it is easier for them to defend and justify a change” in yield curve control in July.
By waiting until then, the BOJ can examine three more Tokyo inflation data points, three sets of national CPI figures as well as the Tankan, the central bank’s biggest quarterly corporate survey.
With Ueda indicating a greater link between inflation and policy decisions compared to a concern over side effects leading to change, economists including Goldman’s Naohiko Baba say it’s probably more logical to expect a change in July when the bank will update its inflation outlook.
In the latest projections last week, the BOJ projected inflation to be below 2% in fiscal 2025, and said that risks are on the downside for that forecast.
Ueda also said last month that to make him consider a YCC adjustment, a better longer-term outlook and the level of its probability would be key.
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