Bank of Japan set to meet expectations -  Danske

According to analysts from Danske Bank, on Friday, the Bank of Japan will meet market high expectations and will announce strong stimulus measures.

Key Quotes:

“We expect the Bank of Japan (BoJ) to cut its policy rate by 20bp to -0.3% and expect additional qualitative measures, including an upscaling of ETF and J-REIT purchases. We believe our forecast of BoJ easing will be a moderate positive surprise to the market compared with current pricing.”

“We expect the Japanese Government to announce a substantial fiscal stimulus package with a direct economic effect of JPY6trn (1.2% of GDP). We do not expect the BoJ to adopt helicopter money measures in the sense of a permanent increase in the monetary base or in the form of direct BoJ underwriting.”

“We expect USD/JPY  to bounce 2-3 figures on the policy announcement but we do not look for a sustained rally in USD/JPY. On a 3-12M horizon, we expect USD/JPY to stabilise as further negative interest rates and continued portfolio outflows out of Japan would help to underpin USD/JPY and thereby counter the underlying support for JPY stemming from fundamentals. We target USD/JPY at 107 in 3M and 108 in 6- 12M.”