Bank of Japan seen Holding Off on Easing, Trump Presidency Adds Improbability


The BoJ is anticipated to wait until the middle of next year before accepting additional stimulus gauges, although Donald Trump’s election as U.S. president enhances uncertainty to the economic outlook, a poll found on Friday.

Approximately 90% of economists surveyed in the past week stated the BOJ’s next policy action would be to adopt additional easing measures. Others stated an unwinding of the central bank’s ultra-easy monetary policy was likely.

“Sharp spikes in the yen against the dollar are unlikely to happen for a while as the Federal Reserve is seen raising rates as expected. This means the BOJ is expected to stand pat,” said Izuru Kato, chief economist at Totan Research.

Fifteen of 25 economists who replied a separate timing question anticipated, the Bank of Japan to wait until the 2nd half of 2017 before increasing its already massive stimulus.

Five stated a change at the April meeting was possible, while three nominated the January meeting. One each picked the meetings in December and March.

The majority of economists replied to the poll before the outcome of the U.S. presidential election.

“But there is a chance that worries over the outlook will grow because the formal announcement of policies under a new administration in the U.S. will come later, so we need to monitor it closely,” Kato added.

Trump’s key policies are seen likely to include improved infrastructure spending, in turn leading to higher inflation, however,  there are worries over trade policy and geopolitical alliances.

In the short term, much will depend on the U.S. Federal Reserve, which is anticipated to continue with a rate hike in December  in spite of the shock Trump win, a separate poll presented on Wednesday.

If the Fed hikes the upcoming month, it will likely increase the U.S. dollar and dent the Japanese yen which traded approximately 106.60 per dollar on Friday, close to 3-1/2-month low, after increasing as high as 101.19 on Wednesday as Trump’s success became more apparent.

In the election, 19 economists stated that the central bank would reduce its -0.1% interest rate more when it next chooses to ease policy, and six expected it would reduce both the interest rate and the 10-year Japanese government bond yield goal.

Six economists stated the Bank of Japan would surge its purchases of exchange-traded funds/real estate investment trusts and four replied that it would increase its purchases of commercial paper and corporate bonds. This question permitted multiple answers.

The consensus from the broader poll found the Bank of Japan will hold the -0.1%  interest rate it carry out on some excess bank reserves steady and will also stay its 10-year JGB yield goal of approximately zero percent throughout next year.

The Bank of Japan is perceived keeping its yearly pace of increase in the amount of outstanding of JGB holdings at approximately 80 trillion yen, however, some analysts say the central bank could lower the figure to approximately 70-75 trillion yen in the coming year and may even drop a reference to the target amount in its policy statement.

“Asked whether the government should announce an extra budget for this fiscal year to March, 19 out of 26 economists said it should not, but some of those said the government was likely to do so. Seven analysts in the poll said the government needed to spend more,” according to the reports.

“Many countries including Japan, the U.S., China and in Europe will possibly shift towards fiscal policy from monetary policy as central banks are running out of steps to take,” said Nobuyasu Atago, chief economist at Okasan Securities.

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