ANZ Research discusses its expectations for the BoJ policy path ahead of its March policy meeting this week.
"Later this week the Bank of Japan is meeting in what is an increasingly challenging environment for the central bank to manage. Growth is slowing, the inflation goal is looking even less attainable and the current easing framework of Yield Cure Control is ineffective.
Although we don’t anticipate any policy change from the central bank this week, we think it must be getting close to a tipping point in terms of considering easing policy more, rejigging its easing framework or rethinking its inflation goal," ANZ notes.
"At the current level of the JPY, the BoJ may not be in a hurry to implement any further easing as it could be a wasted opportunity. If easing does become a higher priority, we think reinforcing forward guidance is probably the best option. However, this isn’t likely to provide the bank with much bang. Thus, the BoJ is likely to do so alongside a boost in asset purchases even if this introduces more distortions," ANZ adds.