Bank of America Merrill Lynch discusses its expectations for the BoJ March policy meeting this week.
"We expect the BoJ to keep all key policy targets and rates forward guidance unchanged at Friday's policy meeting. Both govt and BoJ are likely playing for time, hoping for a stabilization in data flow and mid-year global growth rebound. Our base case is that the BoJ stays pat for the time being. Fiscal policy changes comes first in a downturn scenario,"BofAML notes.
"The FX market will be watching the degree of shift in the BoJ's economic assessment after weak export and production data in January, and Governor Kuroda's tone...All in all, we think the BoJ lacks ammunition, both absolutely and relative to other central banks. Governor Kuroda may sound dovish and reiterate that the BoJ can ease further, but we would not follow any potential JPY weakness. Drastic measures that go beyond the existing framework do not seem to be on the card, at least at this point with the current exchange rate and JPY nowhere near overvalued or the economy-albeit weak-boasting the tightest labor market in decades. We maintain our bullish JPY view," BofAML argues.