He expects the BoJ to take cues from the US economic data. If the rates stay unchanged, says Kiuchi, it will result in outflow of money into emerging markets.
Excerpts from CNBC-TV18's exclusive interview with Takahide Kiuchi, Senior Economist with Nomura Securities:
What are you expecting from the Bank of Japan, this time?
The BoJ is very unlikely to change the monetary policy this time. They are still keeping the wait and see policy so far.
So in terms of a rate hike you do not expect them to move, but in terms of a communication on the direction forward, what do you expect them to say?
Japan's economy is still solid but the concern for Japan is the economic slowdown in the US. The US economic situation is a very important indicator for Japan.
So the BoJ is particularly paying attention to the US economic situations. We still have some concern about the slowdown in the US, which may lead to a slowdown in Japan's economy. So the BoJ has to wait and see the situation particularly in the US.
How did you read the latest set of US data, which came in, both on the labour wages front, which seems to be a bit higher than what people expected and also on labour productivity, which was slowing down? What does it tell you about the growth slowdown fears and the inflations stoking up fears again?
In the last several years, the price situation in Japan has been influenced by international factors like the import of cheap products from China.
If Japan's economy slows because of the weak exports to the US, the BoJ can wait for a long time. Financial markets now expect that the BoJ may keep the interest rate until the first quarter or the second quarter of next year.
Where does all that leave the Yen now, which is very important for us to determine whether the Yen carry trade can resume into other emerging markets? How are you calling the Yen now?
As I mentioned, the financial market is changing its view on the monetary policy. Now that many people start to think that the BoJ cannot increase the interest rate in the near future, it could have sort of a positive impact on the outflow of money from Japan to other countries including emerging countries.
In the last several months, Japan's individual investors have been reluctant to move money abroad because of the increase of interest rate in Japan. But the money has started to come out from Japan to other high yield countries or emerging countries. So the change of expectations from the monetary policy is changing the direction of the outflow of individual money in Japan.
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