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 time 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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