BOJ hold fire, to restore the display despite earthquake

The flowering of the cherry blossom front at the Bank of Japan (BOJ) in 7 April 2011.

Credit: Reuters/Yuriko NakaoBy Leika Kihara

Tokyo | Monday, April 25, 2011/12

Tokyo (Reuters)-the Bank of Japan is expected to sharply cut its economic forecast for the current fiscal year because of last month's shaky ground but the project in the fall, signaling a rebound and ES enough to keep the economy bpnota at least for now.

The Central Bank will nudge up forecasts its retail outlook report twice a year to reflect cost increases on goods, but the last stretch of inflation driven by delivery alone did not shake the policy commitment to ultra-easy.

A 9-member is set to hold additional monetary easing steps, to publish the details of the new loan scheme targeting banks earthquake-hit, which was unveiled at the end of the previous review of the rate.

Here are the possible outcomes of the meeting:

Policy ON blocking, to adhere to the recovery forecast: probably builds

Israeli hoteliers that reflects the expected output from the plant since the supply constraints, earthquake BOJ cut its economic forecast for fiscal year 2011/12, which began on 1 April, from its January projection of a growth of 1.6 percent.

But the BOJ sees little need to make policy as soon as it expects the economy to pick up by autumn, when the power supply chain disruptions and interruptions make as output.

Exports have worsened sharply, and respond to business since the earthquake, while the output you created the record fall in March.

However, the BOJ and policy a few days after the disaster 11 March, feel already sent pre-emptively damage growth.

Half-yearly report, the BOJ will stick to his view, while uncertainty about the impact of the earthquake is high, the economy of Japan will resume a moderate recovery in the next fiscal year.

The median of the financial forecast for the current fiscal year will be truncated to somewhere between probably 0.5 percent or one percent, roughly in line with the 0.7 percent projection by analysts polled by Reuters from the shelves.

BOJ probably rebound forecast next year growth exceeding its January projection of 2.0%.

The response of the market: bond yields, the wine briefly stumble if cut its growth forecast for the BOJ is much more than expected, preventing the fuelling expectations of a near-term function of monetary easing.

Strengthen the commitment to policy-easy option: reasonable

BOJ has pledged to keep interest rates virtually at zero until Japan achieves long-term price stability, which defines "value" as consumer inflation of 1%.

Central Bank to consider tweaking a setting to specify the percentage of the median CPI inflation forecast to 1 by the members of the Board, signaling that it is more or less a target to be achieved for the irritation that it cannot be.

You may also highlight-report twice a year or at the new post of Governor Masaaki Shirakawa-meeting-that an unwinding of its ultra-loose will be considered only when the price increases are driven by economic growth, not only by the food and fuel costs spike.

In this way, the BOJ to dispel speculation that he might be tempted to make the policy easy if ultra-fuel and food costs, rising consumer prices push towards a percentage.

Goods prices was brought to ask seems to fix up the BOJ forecast its core consumer inflation for the fiscal year is about 0.5 percent from 0.3%. He also can stimulate the inflation forecast consumer 0.6 percent for the next year by several percentage points.

The market response is likely to move several markets: few people expect the BOJ to relax its ultra-easy any time soon.

Policy option of comfort: unlikely

BOJ is ready to ease policy further if damage earthquake and tsunami, which triggered a crisis of prolonged nuclear power safety, an obstacle course, likely to threaten the economy recovery.

But at Central Bank monetary policy has little can provide when constraints, instead of requiring the weak are the main growth-damper as is happening now.

The next laklot is fresh evidence of financial and supply constraints are hurting domestic demand enough for economic forecasts of the BOJ undershoot.

BOJ hope to examine the impact of the earthquake on the economy in the months April and may, so it can stand pat until these months policy released in July.

Meanwhile, the BOJ will focus on measures aimed at encouraging banks to lend more to companies by the earthquake itself.

This post details a loan trillion yen (12 billion dollars) for the banks in the area of the earthquake-hit, including the length of the program, you will either six or 12 months.

BOJ will strive to the program loan in may, would be willing to expand it in the coming months if the demand for loans is expected sources proves, knows the thinking of the Central Bank said.

The response of the market transition: a surprise push down bond yields and wine.

(US $ 1 = 81.845 yen)

(Editing by Edmond Klamann)

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