(Bloomberg) -- The Bank of Japan is widely seen standing pat on its key stimulus tools before a ruling party vote next week that will effectively determine the country’s next prime minister.

All but one of 47 economists see the BOJ keeping its negative interest rate and asset-buying targets unchanged Wednesday, a Bloomberg survey shows. The winner of the Liberal Democratic Party’s leadership election is also seen pushing for no immediate change to central bank policy.

Governor Haruhiko Kuroda and his colleagues are likely to flesh out more details of the green lending program they aim to start this year to back businesses tackling global warming. 

On its main tools, though, Japan’s weak inflation pulse has the BOJ stuck in a holding-pattern while the Federal Reserve and other central banks start to rein in pandemic stimulus. Just hours after the BOJ gathers, investors will tune into a Fed meeting for clues about its tapering plans.

While the candidates to replace outgoing Prime Minister Yoshihide Suga all signal support for continuity at the BOJ amid the pandemic, some have hinted the bank should eventually take a more flexible approach to its inflation target so it’s not so hamstrung.

Expect Kuroda to reiterate his commitment to the 2% goal and the BOJ’s long-term stimulus, while steering clear of the political race.

Japan’s Leadership Rivals Diverge on Economic Paths After Covid

With most of Japan’s big cities set to stay under a state of emergency through the end of the month, a key takeaway from the BOJ meeting will be how Kuroda and the board view the economic impact of the country’s summer Covid surge. Some of the board’s nine members have indicated they see the outbreak delaying an already slow recovery. 

The BOJ typically releases its policy statement around noon with Kuroda’s press conference following at 3:30 p.m.

What Bloomberg Economics Says...

“The Bank of Japan will likely keep its policy settings unchanged, but may downgrade its economic assessment as it takes stock of the impact of the outbreak and restrictions.”

--Yuki Masujima, economist

To read the full report, click here. 

What to look for:

  • BOJ watchers will be looking for any indirect response from Kuroda to remarks by the candidates. Taro Kono, the leading candidate to become the next prime minister, says the BOJ’s inflation target is “very difficult” to achieve. 
  • On its green lending program, the BOJ may get specific about the disclosures it will require from banks. Kuroda has hinted he sees the recommendations from the Task Force on Climate-Related Financial Disclosure as a good starting point.
  • The BOJ may darken the tone of its economic assessment to reflect recent production halts by Japan’s automakers and the record wave of virus cases that hit in summer. Longer-term, the bank is likely to stick to its base-case scenario of a gradual recovery taking hold as the impact of Covid fades.
  • Kuroda will probably cite the difference between Japan’s falling prices and inflation elsewhere in making the case for keeping the BOJ’s ultra-easing in place long-term. That will keep downward pressure on the yen.

 

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