Bank of Japan seen easing again after pushing back inflation goal timing: Reuters poll

By Kaori Kaneko

TOKYO (Reuters) – The Bank of Japan is expected to expand its already-massive stimulus program in October, the majority of economists polled by Reuters found – even though Governor Haruhiko Kuroda has repeatedly said there is no need to do so.

In April 2013 the BOJ pledged to achieve 2 percent inflation in about two years, after decades of deflation or very small price rises, unleashing a multi-trillion yen asset purchase program.

But apart from boosting the stock market and driving down the yen, the extra cash did little to budge a stubbornly low inflation rate.

The central bank revised its goal last month and now expects inflation to reach 2 percent by April-September 2016.

Economists in the poll conducted May 13-18 said even that new estimate was too optimistic.

“It is difficult for the BOJ to achieve its inflation target next year,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. “We think it will increase only at a moderate pace.”

Ten of 17 respondents expect the BOJ to add to its stimulus at one of the two policy meetings in October. Of the rest, three chose July, one said September and the remaining three said sometime next year.

Core consumer price inflation, which includes oil products but excludes fresh food prices, will not meet the central bank’s target even in the next fiscal year, the poll found.

It is expected to average 0.3 percent in this fiscal year and rise to 1.3 percent in the next one, unchanged from last month’s view. Those expectations stand in some contrast to the BOJ’s predictions.

Governor Kuroda has cited a broad trend of steady improvements in inflation as the reason he does not see the need for additional stimulus at this stage.

While economists expect more easing from the BOJ, a few said that measure will also fail to spur inflation substantially.

“Even if the BOJ eases again, consumer inflation is unlikely to rise as fast as the central bank expects,” said Masamichi Adachi, senior economist at JPMorgan Securities and a former BOJ official.

“It is difficult to boost expectations for prices and wages unless the economy gets stronger.”

The Reuters poll’s consensus foresees a gradual loss of growth momentum from 2.1 percent on an annualized basis in the current quarter to just 1.4 percent this time next year.

GDP is expected to grow 1.6 percent this fiscal year and 1.8 percent the next, compared with 1.8 percent and 1.7 percent in the April survey.

(Polling by Kaori Kaneko and Sarbani Haldar; Editing by Eric Meijer)

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