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Jan 22 - 02:55 PM

MUFG: Projections for BoJ's January Policy Meeting

By eFXdata  —  Jan 22 - 01:30 PM

Synopsis:

MUFG, a leading financial institution, shares its expectations for the upcoming Bank of Japan (BoJ) policy meeting, with a focus on potential changes in economic forecasts and the future of monetary policy.

Key Insights:

  1. No Immediate Policy Changes:

    • MUFG predicts that the BoJ Policy Board will maintain the current monetary policy stance in the upcoming meeting on January 22-23.
  2. Anticipation of Winding Down NIRP:

    • The bank foresees the Negative Interest Rate Policy (NIRP) being concluded at the BoJ's meeting in April.
  3. Adjustments in Economic Forecasts:

    • It is expected that the BoJ will lower its real GDP growth forecast for the fiscal year 2023 (FY23) in the January Outlook Report, while continuing to express that the economy will grow above its potential rate.
  4. Inflation Projections and Economic Cycle:

    • If the BoJ decides not to lower its core-core Consumer Price Index (CPI) projections, MUFG anticipates that the BoJ will keep looking for evidence of a "virtuous cycle of wages and prices" being achieved in the economy.

Conclusion:

MUFG's analysis suggests a status quo approach in the immediate term from the BoJ, with no major policy changes expected in the upcoming meeting. However, significant developments, such as the end of NIRP, are anticipated in the near future, alongside adjustments in economic forecasts. The BoJ's focus on the interplay between wages, prices, and inflation projections indicates a cautious yet attentive approach to Japan's economic trajectory.

Source:
MUFG Research/Market Commentary

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