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BOJ to Stand Pat Unless Yen Breaches 140, Polled Economists Say

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(Bloomberg) -- The Bank of Japan is expected to hold firm next week with expectations of policy adjustments this year weakening among economists unless the yen breaches the 140 mark against the dollar.

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All but one of 45 analysts said the bank will leave its yield curve control program and asset purchases untouched at the conclusion of a two-day meeting next Friday, according to a Bloomberg survey.

Despite the further slide in the currency this week, only 26% of respondents say it’s likely or very likely the central bank will take some kind of action this year to address the weak yen or inflation, compared with 45% in the previous poll.

Click here to read the full results.

Governor Haruhiko Kuroda has repeatedly said the bank must support Japan’s slow recovery from the pandemic with monetary easing, while emphasizing that foreign exchange rates aren’t a policy target.

With a heightened focus on interest rate differentials ahead of an expected jumbo hike by the Federal Reserve next week, the yen dropped rapidly in recent days to fresh two-decade lows. It has already broken through the 130 mark economists thought would prompt adjustments in the previous survey in April.

The currency hit 134.56 per dollar Thursday morning, less than one yen away from its 2002 low.

Even after the yen’s further drop since the last meeting and inflation topping a target of 2%, Kuroda, Japan’s former top currency official, has insisted that the bank won’t tighten policy until inflation is achieved in a stable manner.

The bank wrongfooted some investors at the last meeting by doubling down on stimulus with daily unlimited bond-buying operations.

Around half of analysts said the bank will continue the fixed-rate purchases until at least the end of April next year when Kuroda’s term as governor ends.

Some 61% of economists also say that continuation of the BOJ’s ultra-low rate policy is becoming increasingly necessary as the government expands spending.

Prime Minister Fumio Kishida’s first fiscal policy guideline, released this week, suggested the government is loosening its stance over fiscal discipline.

Analysts also see a lower chance of the government stepping into foreign currency markets to prop up the yen. Some 88% said currency intervention was unlikely or very unlikely compared with 81% in April.

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