Economists at Goldman Sachs and Bank of America said that given the recent dovish statements by the new head of the Bank of Japan Kazuo Ueda, we should not expect an early change in the parameters of monetary policy.
At a press conference after the May meeting, Kazuo Ueda denied that the central bank's planned review of its monetary policy will directly lead to a change in its massive monetary easing. The BOJ said it would conduct a "broad-perspective review" of its longstanding monetary easing policy in a time frame of around a year or a year and a half. In addition, the Central Bank has revised its forecasts for inflation and GDP. It is now expected that in fiscal 2023, inflation will be 1.8% (+0.2% compared to the previous forecast), and in fiscal 2024, inflation will rise to 2% (previous forecast: 1.8%). Meanwhile, the GDP forecast for fiscal 2023 was revised to 1.4% from 1.7%, and the forecast for fiscal 2024 was improved by 0.1% to 1.1%.
Now, Goldman Sachs and Bank of America economists expect the Bank of Japan to announce an adjustment to the bond yield curve control program at its July meeting, rather than at the June meeting. In their opinion, the Central Bank to switch its yield target from the 10 year to 5 year. Economists at Barclays and UBS hold a similar opinion, referring to the latest statements by Kazuo Ueda.
"In general, Kazuo Ueda's statements suggest that the Bank of Japan wants to analyze more data before deciding to change policy parameters. Before the July meeting, policymakers will be able to evaluate three more CPI reports and Tankan, the central bank's biggest quarterly corporate survey," Bank of America said, adding that it is more logical to expect policy changes at the July meeting when the bank updates its inflation forecast.