Flash Notes-Japan: BOJ Holds Policy Stance Unchanged In March 2015

No surprise again as the Bank of Japan kept its monetary stance unchanged today (17 Mar) to“conduct money market operations so that the monetary base will increase at an annual pace ofabout 80 trillion yen.” The decision was again not unanimous at 8 to 1 as Kiuchi voted against it.

    While BOJ continued the same optimistic growth outlook (as it did in February), it downgraded thecore inflation to be in the range of 0-0.5% and it was more definitive on CPI y/y inflation, expecting it“to be about 0 percent for the time being, due to the effects of the decline in energy prices.”

    We believe the BOJ is unlikely to do more & probably will choose to maintain the status quoposition at least in 1H 2015. We expect the USD/JPY pair to break conclusively above 121 towardsthe 125 by end-2Q 2015 only when the Fed finally delivers the first rate hike (likely in June 2015).