BOJ unable to ride with Abe gov't's wrap-up mode – Nomura

Analysts at Nomura point out that the Japanese Prime Minister Shinzo Abe and others from the government and Cabinet have been making remarks suggesting a change of position on the "exit" from the Bank of Japan's monetary easing and on the 2% price stability target.

Key Quotes

“In response, expectations have grown that the BOJ might avail itself of the government's change of position and advance with normalization of monetary policy.”

“That said, we think there are circumstances that force the BOJ to stick with its 2% price stability target, therefore preventing it to move toward an "exit".”

“We think the government and Cabinet have indicated plans to seek an "exit" from monetary easing because public opinion is not necessarily in favor of a 2% increase in prices that leads to lower real purchasing power, and because Prime Minister Abe himself would like to wrap up or bring to a close some of the initiatives taken under his administration now that his party's leadership race is over.”

“We think the BOJ is unable to follow along with this and is being put in a position of having the rug pulled from under it as the government and Cabinet try to orchestrate an "exit".”