BoJ widely expected to confirm its commitment to its huge QQE programme – Rabobank

Jane Foley, Senior FX Strategist at Rabobank, suggests that Japan’s inflation rate remains well below the central bank’s 2% target and in contrast to the less dovish signals stemming from many of the world’s major central banks, the BoJ is widely expected to confirm its commitment to its huge QQE programme at its policy meeting tomorrow.

Key Quotes

“The tone of Governor Kuroda is likely to be watched closely by the market. By dropping the phrase “reversal rate” into a speech in November, Kuroda injected some doubt into the market as to his commitment to the BoJ’s current policy settings. The term refers to a level of interest rates so low that the cost to Banks’ profitability stops credit creation. Kuroda used the term a couple of weeks later in parliament and, despite the Governor’s subsequent vocal commitment to QQE, the market is speculating as to whether or when the BoJ will fine tune its policy, potentially raising its yield target or slow the ETF buying programme. This speculation, combined with the impact of further geopolitical events could hinder the ability of the carry trade to push USD/JPY higher in the coming months.”