Markets to take cues from BOJ and US Fed meet

Indian markets along with global markets will be taking cues from the Bank of Japan (BOJ) announcements on Thursday as the Central Bank of the third largest economy in the world is scheduled to declare its monetary policy. Japan's economy has been struggling with deflationary environment and the officials have been contemplating further easing of interest rates.

The BOJ meeting is happening at a time when the GDP of Japan is expected to shrink for the second quarter because of the earthquakes that shook southern Japan recently. Yen has strengthened recently and the wage growth has slowed down in Japan. Strengthening Yen is a concern for Japanese economy as it in turn renders its exports expensive. Exporters in Japan are already grappling with the global slowdown. Yen is up by almost 8 percent since January this year.

BOJ’s Governor, Haruhiko Kuroda introduced negative interest rates for some commercial banking deposits this year in the month of January. Analysts argue the move has been ineffective and not serving the purpose of achieving the target inflation of 2 percent which was declared by Haruhiko Kuroda. An aggressive easing is expected by several analysts tracking the Japanese economy for this round of the BOJ meet. In case the policy rates are kept unchanged, then the dollar can be expected to weaken against Yen and that may add volatility to the financial markets.

Markets will also be eyeing Janet Yellen's announcement as US Federal reserve meet concludes on Wednesday. At least one rate hike in the year 2016 is expected from the US Central Bank and consensus seems to be building amongst fund managers that the interest rates may be hiked in the month of December this year. Last year in December the US Federal reserve had increased the interest rates for the first time in 10 years, and had given indications regarding increasing interest rates at least twice in 2016.