We expect the BOJ to maintain its monetary policy (Monetary Base Target at ¥270T, same as consensus and previous). The rate of increase in consumer prices has begun to narrow after peaking in April, but this is within the BOJ’s expectations as it has already said that CPI growth may slow to near +1% toward the summer mainly as the effects of yen depreciation drop out. As such, we do not see the BOJ implementing additional easing at least at this stage. At the upcoming meeting the BOJ will conduct an interim assessment of the Outlook for Economic Activity and Prices (“Outlook Report”) published on April 30. With the BOJ having stated that current price rises are in line with expectations, we think it will maintain its price outlook. However, we think the BOJ is likely to slightly lower its FY2014 real GDP growth forecast to +1.0%, from +1.1% as of April, to reflect weaker-than-expected Apr-May data from the real economy in the wake of the consumption tax hike.
Goldman Sachs