TOKYO (Reuters) - Japan’s central bank is likely to wait longer than initially expected to exit its super-easy stimulus, a Reuters poll of economists showed,, with almost half predicting that it won’t happen until 2020 or later given sluggish inflation.
For years, the Bank of Japan has desperately tried to fan inflation to a target of 2 percent by heavy buying of bonds and other assets and, more recently, capping borrowing costs at around zero percent. But consumer inflation has remained stuck at about 1 percent.
Of 37 economists surveyed, 16 expect the BOJ will finally start to unwind that ultra-easy policy sometime next year, down from 18 in the April survey.
Sixteen say it will happen in 2020 or later, up from 12 analysts in last month’s survey. The remaining respondents projected either October or December this year.
“The pace of increases in consumer prices is more moderate than expected. It’s hard to see the BOJ exiting the current policy for a while,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
Last month, the central bank ditched its timeframe to achieve that inflation target, a move analysts say is aimed at keeping market expectations for more stimulus in check.
Economists said policymakers and other experts will be watching to see if recent annual wage hikes in the 2-3 percent range translate into higher consumer spending, said Bjørn Tangaa Sillemann, analyst at Danske Bank.
“That is what needs to happen before BOJ can begin any tightening speculation,” he said.
But a planned increase in the sales tax from 8 to 10 percent next October could snuff out any spending recovery.
The economy may have shrunk in the first quarter for the first time in two years, which would snap Japan’s longest period of economic expansion since the 1980s boom years. But analysts predict growth will continue, albeit at a low level.
For the current fiscal year to March 2019, economists polled in the May 7-14 survey forecast the economy will grow 1.2 percent, compared with an expected 1.8 percent expansion in the last fiscal year ended in March.
They predicted the core consumer price index, which includes oil products but excludes fresh food, will grow 0.9 percent this fiscal year and also 0.9 percent for fiscal 2019, stripping out the impacts from the October 2019 sales tax hike.
About 80 percent of the economists surveyed say the moves toward trade protectionism have not negatively affected the Japanese economy directly.
“The high uncertainty about the future trade frictions between the United States and Japan and about the indirect impact from the U.S.-China trade tensions somewhat induced yen appreciation in March and April, and makes the export firms cautious about their spending plans,” said Hiroshi Ugai, chief economist at JPMorgan Securities Japan.
“But the degree of the negative effect is limited, not changing the story of Japan’s economic expansion.”
Reporting by Kaori Kaneko; Additional polling by Shaloo Shrivastava; Editing by Malcolm Foster and Sam Holmes