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BOJ Refrains From Extra Ease as It Predicts Faster Inflation

Haruhiko Kuroda, governor of the Bank of Japan. Photographer: Kiyoshi Ota/Bloomberg
Haruhiko Kuroda, governor of the Bank of Japan. Photographer: Kiyoshi Ota/Bloomberg

April 30 (Bloomberg) -- Governor Haruhiko Kuroda said the economy is weathering a sales-tax bump and predicted inflation will reach the Bank of Japan’s goal next fiscal year, suggesting limited prospects for any immediate extra easing.

The Bank of Japan today maintained a plan for an annual increase in the monetary base of between 60 trillion yen and 70 trillion yen ($683 billion). Price gains will quicken in each of the next two financial years to reach a 2 percent goal, according to BOJ board median estimates released in Tokyo.

While the BOJ trimmed its growth estimate for the current fiscal year, Kuroda said a setback to the economy from a bump in the sales tax this month has been within expectations, with consumer spending solid and employment improving. Citigroup moved its forecast for further easing to sometime in or after autumn from July, while Societe Generale SA -- which had forecast the BOJ would move today -- said it now sees little possibility of further stimulus this year.

“Considering the outlook report, lower growth alone won’t be enough to trigger extra easing and the BOJ will need to wait for downside risks to its inflation outlook to appear,” said Itochu Corp. economist Yoshimasa Maruyama. “We’re pushing back our forecast for the timing of more stimulus to the first quarter next year from as early as July.”

Sales Tax

The Nikkei 225 Stock Average has been the worst performer among major global stock markets this year, signaling fading expectations for Prime Minister Shinzo Abe’s economic policies. The index closed up 0.1 percent today in Tokyo, falling for a fourth straight month. The yen traded 0.1 percent higher at 102.51 per dollar at 4:55 p.m.

The central bank is monitoring the economy’s performance after the 3 percentage point sales-levy rise on April 1 that’s projected to trigger a one-quarter contraction due to weakness in consumption. The increase, which is aimed at helping rein in the world’s biggest debt burden, adds headwinds to Kuroda’s bid to drive price gains with a record easing campaign he began in April last year.

“July will be key for the BOJ to judge if additional stimulus is needed,” said Takeshi Minami, chief economist in Tokyo at Norinchukin Research Institute Co. “It’s possible the sales tax will be a drag for a prolonged period as wage growth isn’t catching up with inflation.”

Wages Fall

Consumer prices will rise 2.1 percent in the year starting April 2016, accelerating from 1.9 percent in the previous fiscal year and 1.3 percent this year, according to median forecasts of the BOJ board. The economy will expand 1.1 percent this fiscal year that began this month -- less than its 1.4 percent forecast in January -- and grow 1.5 percent next year and 1.3 percent in the following year, according to the median forecasts.

The BOJ’s inflation forecasts for the current fiscal year and following year matched estimates made in January. Its benchmark price gauge excludes fresh food. The projections are the median estimates of the nine board members and exclude the effects of sales-tax increases.

Wages excluding overtime pay and bonuses fell for a 22nd straight month in March, dropping 0.4 percent from a year earlier. Tokyo’s consumer prices excluding fresh food rose 2.7 percent in April, the fastest pace since 1992, reflecting the effect of the sales tax increase.

A gauge of Japan’s manufacturing activity tumbled in April to the lowest level since February last year, according to data released today. Industrial production in March rose 0.3 percent from the previous month, less than a 0.5 percent gain forecast in a separate survey of economists by Bloomberg.

To contact the reporters on this story: Toru Fujioka in Tokyo at; Masahiro Hidaka in Tokyo at

To contact the editors responsible for this story: Paul Panckhurst at Arran Scott, James Mayger

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