It’s a close call, but not everyone expects the Bank of Japan to tighten policy today

Commonwealth Bank of Australia:

  • A likely strong initial result from the shunto wage negotiations will open the door for the Bank of Japan to remove its Negative Interest Rate Policy (NIRP) and Yield Curve Control (YCC) soon.
  • Our base case is for the BoJ to signal a policy exit is possible at this meeting but wait until April to exit the NIRP and YCC.
  • The risk is the BoJ exits both policies at this meeting.


  • Shunto wage negotiations have started stronger than last year, giving the BoJ a green light to move away from negative rates at its policy meeting this week.
  • Our central case for the BoJ to exit negative interest rates remains in April, but it is an extremely close call.
  • The BoJ will be updating its forecasts at that meeting and it will have more news on union-based wage agreements and data on business inflation expectations.
  • Media reports suggest the BoJ is close to exiting YCC.
  • The central bank may also consider dropping its guidance that interest rates could go lower and end its J-REIT and ETF asset purchase programs.


  • Given the current fragility of the economy, the BoJ is not expected to deliver any material changes to its policy setting just yet

If these 3 are correct the JPY will get smashed lower.

This article was written by Eamonn Sheridan at Source