Watching the BOJ in 2014

By Stephen Alley | Interactive Brokers Dec 4, 2013, 11:11 AM 

A very good Reuters article from Monday outlines events in 2014 that may result in the BOJ considering further easing measures:

  • On April 1st 2014, the Japanese government is due to raise the consumption tax from 5% to 8%. Market particpants have speculated that the BOJ may ease before the tax rise in March, or ease in April to coincide with the tax rise.
  • By July 2014, the BOJ will have collected data to quantify the effect of both spring wage negotiations and the consumption tax hike on the economy. This may be the┬átime that the BOJ considers easing further.
  • Lastly in October 2014, the BOJ will publish its Outlook Report which may demonstrate how likely the BOJ is of reaching its stated goal of 2% inflation that it committed to achieve within 2 years of April 2013.

Nikkei options currently show a positively sloped term structure as the market attempts to price-in the possibility of further BOJ measures in 2014.

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