Band of Japan Decision-Day Guide: Kuroda Weighs Growing Overseas Risks

(Bloomberg) -- The Bank of Japan is expected to leave rates unchanged on Thursday as risks from trade protectionism, cheaper oil and a higher sales tax cast a shadow over the outlook for the nation’s economy and the prospects of making progress toward 2 percent price growth.

All 49 economists surveyed by Bloomberg see the BOJ keeping its policy settings untouched. Many of them have already pushed back their expectations of when the bank might join its global peers in normalizing policy given the mounting economic risks.

Since the bank’s main policy statement is unlikely to offer many new details, attention will focus on Governor Haruhiko Kuroda’s press conference comments on the risks stemming from trade tariffs, the slowdown in China and recent market instability. The likelihood of inflation weakening again as oil prices and mobile phone charges fall is another pressing issue for Kuroda.

The statement typically comes out early afternoon, followed by a news conference by Kuroda at 3:30 p.m.

Key Points

Policy Recap

• The BOJ pledges to keep interest rates extremely low for an extended period of time.
• It imposes a minus 0.1 percent interest rate on some reserves financial institutions keep at the central bank.
• It targets a yield of about zero percent for 10-year Japanese government bonds, while allowing a trading range of about 0.2 percent either side of the mark.
• A guideline to increase JGB holdings by about 80 trillion yen a year is now secondary to controlling interest rates. The actual pace of purchases has halved.
• It also has a guideline for increasing holdings of exchange-traded funds by 6 trillion yen a year. The actual level of purchases has varied greatly from month to month, depending on market conditions, and has already risen above the guideline this year.

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