BOJ to keep rosy economic view despite trade perils; policy seen steady
* Policy decision expected 0230-0430 GMT
* BOJ seen keeping interest rate targets unchanged
* Board to scrutinise market moves since July decision
* Abe signals need for exit strategy from easy policy
* BOJ Gov Kuroda to brief media 0630 GMT
By Leika Kihara
TOKYO, Sept 19 (Reuters) - The Bank of Japan is expected to
keep monetary policy steady on Wednesday and maintain its
optimistic view on the economy, even as escalating global trade
frictions threaten to chill growth.
The central bank's nine-member board will also likely
scrutinise bond market moves since its decision in July to allow
yields to move more flexibly around its zero percent target.
At a two-day rate review ending on Wednesday, the BOJ is set
to maintain its short-term interest rate target at minus 0.1
percent and that for long-term rates around zero percent.
It is also seen sticking to a pledge, put in place in July,
to keep rates very low for an extended period as inflation
remains far off its 2 percent goal.
"The BOJ's September monetary policy meeting should be just
an extension of the July one and we expect a 'wait and see'
stance with no major announcements," said Katsunori Kitakura,
lead strategist at Sumitomo Mitsui Trust Group.
"By introducing forward guidance, the BOJ has successfully
dispelled any speculation of a rapid exit from its easing
The meeting comes ahead of a ruling party leadership race on
Thursday, which Prime Minister Shinzo Abe looks set to win and
put him on track to become Japan's longest-serving premier.
While few analysts expect the BOJ to immediately dial back
stimulus, politicians have sent signals that they are becoming
more amenable to the idea of a future exit from easy policy.
Abe said last week the BOJ's ultra-easy policy should not
last forever, signalling his hope of laying the path toward an
exit from a radical stimulus programme.
Markets are focusing on how Governor Haruhiko Kuroda could
respond to Abe's remarks, as well as clues on whether the BOJ
may act again to boost trading activity.
At his post-meeting briefing, Kuroda may also warn that
protectionism benefits no country, in the wake of U.S. President
Donald Trump's decision to slap new tariffs on China.
Japanese policymakers fret that trade frictions could hurt
business morale and discourage firms from ramping up spending.
Still, the BOJ is seen maintaining its assessment the
world's third-largest economy will continue a moderate expansion
driven by robust global demand.
It may offer a slightly more upbeat view on capital spending
than in July, reflecting a slew of recent data showing companies
are buying more equipment to deal with labour shortages.
Despite the BOJ's steps in July to make its policy framework
more flexible and sustainable, long-term yields have been caught
in a narrow band around 0.1 percent, underscoring the difficulty
of chasing two goals - sticking to a policy that aims to cap
bond yields while attempting to boost trading activity.
(Reporting by Leika Kihara
Editing by Shri Navaratnam)
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