BOJ Program Tweaks Fail to Alter Most Analysts' 2016 Calls

Most economists are sticking with their forecast on whether the Bank of Japan will add to its unprecedented monetary stimulus after Governor Haruhiko Kuroda Friday announced tweaks to the program, retaining a sharp split about what the central bank likely will do in 2016.

Only three of 25 economists said they are shifting their prediction by postponing the timing of more easing measures while the rest didn’t change their view, according to a Bloomberg survey conducted Monday. Ten economists foresee expanding the stimulus program by July and one predicted more easing in January 2017 or later. Fourteen projected no additional stimulus in the foreseeable future, the survey showed.

Japan’s Nikkei 225 Stock Average fell for a third day Tuesday. The BOJ’s decision Friday triggered roller-coaster moves in the market as it was initially perceived as an expansion of monetary stimulus, and then the market dropped when it became clear that Kuroda was making changes to the existing stimulus program.

Kuroda said in a news conference Friday after the announcement that the action wasn’t an expansion of stimulus and said that any policy adjustment would be “bold” if the path to the 2 percent inflation target was in danger.

“I haven’t changed my view because it was technical adjustments,” said Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. “The BOJ will have to add stimulus probably in April and the situation is getting worse as oil keeps falling. ”

Economy Minister Akira Amari indicated there was no pressure on the BOJ, following a release Tuesday of the government’s price forecast of 1.2 percent for the year starting in April, below the central bank’s 2 percent target. Instead, Amari said low oil prices were good for Japan’s economy. Japan imports almost all of its oil.

Program’s Limits

Fourteen economists surveyed said Friday’s decision reflected the limits of monetary easing by the bank while also laying the groundwork for future stimulus. Six economists said the decision just underscored the limits of Kuroda’s easing measures.

The BOJ said it is extending the average maturity of bond purchases, increasing the maximum amount of each purchase of Japan Real Estate Investment Trusts while keeping its target for increasing the monetary base unchanged at an annual pace of 80 trillion yen ($659 billion). The central bank also established a program to buy 300 billion yen in exchange-traded funds annually to offset sales of stocks it holds.

Since the Oct. 30 meeting when the BOJ delayed its timetable for reaching the inflation target yet didn’t expand the monetary easing program, an increasing number of economists have postponed their calls for when the central bank will next ease. Others have stopped predicting more stimulus altogether.

Before last week’s meeting, 48 percent of those surveyed said they didn’t see additional stimulus. That compares to only 15 percent in a smaller survey in January.

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