The Bank of Japan could decide as soon as mid-May whether further stimulus is needed to keep inflation on track for its 2 percent target after a sales-tax bump next month, an adviser to Prime Minister Shinzo Abe said.
“If the BOJ judges that the economy has fallen off its projected path, it will act appropriately and flexibly, and further easing is possible,” Etsuro Honda said in an interview at the Prime Minister’s Office in Tokyo yesterday. “I believe the BOJ will act if it sees changes in price expectations.”
While Honda, 59, said he’s become more confident the economy will withstand the higher levy as inflation expectations take root and price gains accelerate, the first indications of the extent of the blow will appear in May. Honda said he sees “considerable” room for the BOJ to boost the pace it buys exchange-traded funds should it deem more stimulus is needed.
The economy is forecast to contract an annualized 3.5 percent in the three months from April, when the sales levy will rise to 8 percent from 5 percent. Abe is lifting the tax in an effort to rein in the world’s biggest debt burden, even as he tries to end 15 years of deflation with fiscal and monetary stimulus and steps to boost private-sector growth.