Bank of Japan to remain on hold next week

We now expect the Federal Reserve to cut interest rates by another 25bp next week, which could result in a renewed strengthening of the yen and increase the pressure on the Bank of Japan to lower interest rates. But a cut by the Fed is already fully priced. And with exports showing signs of a rebound and retail sales falling much less after October’s sales tax hike, we think the Bank will keep its policy rates unchanged.