BNP Paribas - "The projections are remarkably buoyant. On growth, the Bank has raised its growth projection by 0.6 percentage point both for FY2013 and FY2014 to 2.9 and 1.4%, respectively. This is mainly related to the change in direction of macroeconomic policies. This is very high compared to our forecast and those of other institutions. We expect GDP growth in 2013 close to 1.5% and in 2014 close to 1%.
On the risks, the BoJ mentions that delays in implementation of regulatory and institutional reforms could lead to lower growth. It is a coded warning to the authorities to make progress on the third “arrow” of the government’s three arrows strategy. The other two arrows are monetary and fiscal policy. The BoJ also underlines the importance of fiscal consolidation. It argues that people might spend less if they are more concerned about fiscal sustainability and vice versa.
Bank plays down the risks related to the new monetary strategy. Despite the rapid rise in stock prices on the Tokyo stock exchange, the Bank does not see excessive bullish expectations in asset markets building up or in the activities of financial institutions. However, the Policy Board signals that attention should be paid to the fact that government bond holdings by the financial institutions remain at elevated levels."