Economist at UOB Group Lee Sue Ann sees the BoJ gradually moving towards an exit of the ultra-accommodative stance.

Key Quotes

“This will be new BoJ Gov Kazuo Ueda’s first policy meeting. Since Ueda is not known as either very dovish or very hawkish in his policy view, we believe the normalising will be carried out at a gradual, well-telegraphed pace, and not a sharp and sudden reversal.”

“We expect Ueda to carry out the unwinding in two broad steps: 1) A protracted period (Apr to Dec 2023) of forward guidance to prepare market for an orderly exit of BOJ’s ultra-easy monetary policy which may also involve a widening of the trading range of the 10-year JGB yield (to +/- 100bps). 2) We expect monetary policy normalization to begin only in early 2024 - YCC to be dropped and negative policy call rate to rise from -0.1% to 0% in Jan 2024 MPM.”