Japan continues to flirt with deflation despite two years of massive monetary easing, raising expectations for more stimulus measures, but the central bank’s hands may be tied, analysts say.
“The Bank of Japan (BOJ) won’t ease again,” said BNP Paribas chief economist Ryutaro Kono in a note published last Friday. “One reason is that the government is worried about the negative effects of a weaker yen and isn’t keen on more easing.”
BOJ Governor Haruhiko Kuroda pledged in April 2013 to drag Japan out of two decades of deflation. He launched an unprecedented quantitative easing program that has seen the yen tumble more than 40 percent against the U.S. dollar and Japanese stocks rally by over 50 percent.