The BoJ is likely to lower its economic outlook for FY 2014/2015 at the meeting April 30, but Japan economists in Citi Tokyo don’t expect any big change in the long-term story. The growth outlook for FY 2016 will be left unchanged at 1.6%. For FY 2017, which will be the first look, it could be lower than 1% but the main reason will be the influence of the 2nd sales tax increase postponed to April 2017. Our economists’ forecast for core CPI is 2.2% for FY 2016 and 2.0% for FY 2017 (excluding the tax hike effects). As such, the Japanese central bank is expected to retain its long-term optimistic scenario.
Also, we believe Governor Kuroda, who has experience at the top of Japan’s FX policy in the MoF, would be paying great attention to US/Japan relations. Japanese Prime Minister Abe is now visiting the US for a summit meeting with President Obama and speech to US Congress. While the TPP negotiation and the TPA (Trading Promoting Authority) discussion are going to reach final stages, Kuroda understands yen weakness won’t be politically welcome. We’re sure that the veteran MoF bureaucrat will try to be more cautious this week not to stimulate the foreign exchange market. The JPY subsequently is unlikely to experience any big surprise from this week meeting.