The Bank of Japan is expected to ease policy further by this summer to help boost the economy and pull it out of a 15-year deflation, as the effects from Prime Minister Shinzo Abe’s stimulus strategy loses momentum, a Reuters poll showed.
Economists in the survey also remain skeptical that the central bank will achieve its 2 percent inflation target in the year from April 2015.
Just as the world’s third-largest economy is about to hit headwinds from an April sales tax hike, growth is already coming in well below expectations on sluggish exports and lackluster consumer spending and capital expenditure.
Japan’s economy grew at a much slower pace than expected in the fourth quarter, expanding at an annual 1.0 percent rate, well below the median forecast of 2.8 percent.
Given the prospect that the positive effects could be fading from Abe’s unprecedented monetary stimulus and huge fiscal spending, expectations are rising that the BOJ will have to increase its enormous purchases of bonds and other assets.
“Economic data which reflects the sales tax effects will come out around July-September,” said Takumi Tsunoda, senior economist at Shinkin Central Bank.