Divergent Data: Anticipating Japan’s Monetary Policy Meeting

  • Wednesday, June 15, 2016

Ahead of the Bank of Japan’s (BOJ) monetary policy meeting tomorrow, Prattle has identified divergent trends in the BOJ’s sentiment data.

The BOJ unexpectedly cut its benchmark rate to -0.1% in January in hopes of weakening the Yen and strengthening the Nikkei 225. Since the move has failed to accomplish either of these goals, the BOJ’s Negative Interest Rate Policy (NIRP) has drawn criticism from lawmakers for confusing markets rather than calming them.

Consequently, BOJ sentiment has risen from slightly dovish a month ago to neutral recently, suggesting that they are unlikely to lower rates at this week’s meeting.

BOJCombineJune15_edited

However, given the BOJ’s tendency for surprising the market, stimulative action is not out of the question, especially on account of weak manufacturing data. Additionally, sentiment from the members of the Policy Board has plummeted in recent weeks and shows little sign of recovery.

Although a rate cut is likely not in the cards for this week, we would not be surprised if the BOJ announced further quantitative easing measures.

The Signal Team

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