The Bank of Japan is reportedly anticipated to reduce its price and economic outlooks for the next fiscal years at a quarterly appraisal that is scheduled in April. The outlook reflects the gloomy atmosphere in the bank as its reform measures failed to stimulate the nation's economy. The economy still stays stagnate even after pouring capital of 60 to 80 trillion yen annually for about three years.
The bank's negative interest rate policy adopted in January became unsuccessful after it failed to stop the rise of yen value or improve stock prices. Many BoJ authorities remain confident regarding local demand, but some fear that global financial crisis and poor demand from emerging countries may pose a threat to Japan's production sector and exports. The bank might trim its price and growth outlooks in order to echo this poor demand from external markets, Reuters said quoting sources familiar with the matter.
This move could increase the pressure for taking further easing measures, despite the flagging confidence in the financial reform policy of the bank. The bank plans to evaluate interest rates in the coming week and that its verdict on production, exports and the entire economy might be less attractive than it was in January when the bank was confident about the economy.
In January, the bank expected the economy to widen 1.5% and core customer inflation to hit 0.8% for the year starting in April. BoJ's policymakers might reduce the economy outlook near to private prediction of around 1.3%, according to the sources. The increase in the Japanese yen will burden inflation further by lowering the cost of fuel and imported products.
Meanwhile, Haruhiko Kuroda, governor of BoJ, wants to increase the sales tax in 2017. Kuroda seems to be least bothered about the past experience when the nation fell into recession after increasing the sales tax. However, Kuroda noted that sales tax hike, which is planned for April 2017, will have a smaller effect than the previous hike. He said, "The effect of the sales tax hike will be about a bit more than half of what it was last time".
According to Hideo Kumano, an analyst at Dai-ichi Life Research Institute, Kuroda's decision could have a higher impact than the previous time as consumer expenditure has lost its momentum over the recent period. However, Etsuro Honda, senior economic advisor of Shinzo Abe, said in February that the sales tax hike should be delayed until April 2019, as reported by ASIA TIMES.
Bloomberg said that the bank's loans increased 2.2% and deposits jumped 3.1% in February. The nation's economy contracted an annualised 1.1% in the fourth quarter of 2015. In addition, the nation had zero inflation during January.
BoJ's officials warn that if volatility in the global market continues, it will become tough for Japan's economy to recover from the situation. The bank is trimming its growth outlook citing the failure of its previous stimulus pack.
Join the Conversation