BOJ May Have Bought More Time

The Bank of Japan’s (BOJ) surprise decision to push back the date for achieving its two percent inflation target may signal the central bank is trying to buy time before admitting it needs to easing monetary policy again.

“It is far from clear that Quantitative and Qualitative Easing (QQE) has lifted inflation expectations among households and firms. In fact, expectations of future price rises may fall sharply in coming months as observed inflation may turn negative,” Marcel Thieliant, an economist at Capital Economics, said in a note Thursday. “We therefore remain convinced that more monetary easing will be needed before too long.”

Other analysts are also pointing to signs that inflation isn’t cooperating with the BOJ’s forecasts, but the central bank’s unexpected move Thursday to give up its self-imposed goal of achieving its inflation target this year and instead target fiscal 2016 has spurred many to move back their forecasts for the next round of monetary easing.