TOKYO (Reuters) – Expectations have risen sharply that the Bank of Japan’s next policy move will be to ease further, a Reuters poll of economists found, as the U.S. Federal Reserve looks set to cut interest rates this month for the first time in over a decade.
Three-quarters of economists said the BOJ’s next move would be to expand stimulus, up from about half last month and 38% just two months ago. Almost two-thirds of those who predicted easing expect it within the year and some as early as this month.
Speculation - Easing - US-China - Trade - War
Speculation had already been growing for further easing as the U.S.-China trade war and weakening global demand threaten Japan’s export-reliant economy.
Fed rate cuts could inflict further damage by boosting the yen against the dollar, making Japanese exports less competitive and eroding profits when repatriated to Japan. A major effect of the BOJ’s massive stimulus since 2013 has been a weaker yen.
Pace - Yen - Appreciation - Dollar - Fed
“The pace of the yen’s appreciation against the dollar when the Fed starts cutting rates will definitely help decide whether the BOJ needs to adopt more easing,” said Yasunari Ueno, chief market economist at Mizuho Securities.
“If the gap in interest rates between Japan and the United States shrinks and U.S. shares tumble at the same time, the yen could try 100 yen per dollar. Then the BOJ will have to ease further knowing there would be side effects.”
Currency - Dollar - August - Thursday
The Japanese currency last strengthened beyond 100 to the dollar in August 2016. It traded around 107.90 on Thursday.
U.S. Federal Reserve policymakers, moving toward their first interest rate reduction in a decade later this month, on Tuesday sketched out arguments for whether rates should be cut by a quarter or a half a percentage point.
Thirty - Economists - BOJ - Move - Policy
Thirty of 40 economists predicted the BOJ’s next move would be to loosen policy further, while 10 said the bank...
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