BoJ to Add Stimulus in April? - ING
In respect of PM Abe announcing that the 2017 tax hike will go, James Smith, Economist in Developed Markets at ING Bank, explained that an interesting comment from PM Abe was his suggestion that G7 policy coordination is needed to stimulate global growth, hinting that he may push for this at the next meeting in Japan at the end of May.
"In our opinion, any co-ordinated action would likely take the form of a boost to public investment from each member state (as was suggested by the OECD). Ultimately though, it seems fairly unlikely that such a move would be adopted, particularly in light of the forthcoming US election and more prominent political issues in Europe.
Barring any large, unexpected supplementary fiscal measures in the coming weeks (something which PM Abe ruled out today, favouring front-loaded action), we think there is a fairly strong chance that the Bank of Japan will add stimulus at its April meeting. With a fairly uncertain growth outlook and perhaps more importantly (at least for the BoJ), so-called “core core” inflation set to trend downwards this year, the economic case for additional stimulus is building.
Although we would not rule out a rate cut (and incidentally, this will be the main policy tool going forward), it may be too early to expect one at the next meeting given that public/market sentiment to the policy remains fairly unfavourable. On balance, we think any stimulus would be channelled through an increase in risk assets (ETFs or perhaps an expansion of corporate bond purchases)."
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