The Bank of Japan’s monetary policy meeting on Tuesday is the focus of much greater global attention than normal. The Japanese economy is headed into yet another downturn, and the central bank seems likely to admit that its 1 per cent inflation target will not be achieved in fiscal 2014. The meeting will probably end with another round of increased asset purchases, lifting the BoJ’s total purchase programme from Y80trn to about Y90trn-Y95trn.
That, however, is not the real reason why the BoJ is back on the global radar screen. Yet another modest rise in asset purchases, which analysts have termed “QE9″, is unlikely to impress anybody. The real reason for market attention is that there is now enormous political pressure on the BoJ to do something much more dramatic to help the economy break out of its deflationary trap. Read more