Bank of Japan Needs To Add Stimulus To Keep Abenomics Moving

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.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza