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Nomura: BOJ to remain on hold

According to strategists at Nomura, we should expect the BOJ to keep its policy unchanged at the meeting on Thursday.

"While Q3 growth has slowed from the first half of this year, the Bank is likely to remain optimistic on the economic outlook. The Bank just released its semi-annual outlook report on 31 October, in which it expects 2.7% growth for the financial year 2013. The Bank also forecasts inflation to reach 1.9% in financial year 2015, what is much more optimistic than private forecasters expect", Nomura economists explain. 

"Recent rises in the Nikkei and USD/JPY also reduce the likelihood of a near-term easing. Japanese inflation has been improving, while inflation pressures are decreasing in the major advanced economies. In fact, Japanese headline CPI inflation is now higher than the eurozone's CPI inflation and US PCE inflation, while the core measure of Japan still lags behind the eurozone and US."

Analysts conclude that the impact of the BOJ's decision this week on FX will likely be small. However, they add that further easing is still likely next year, especially after the scheduled tax hike next April.

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