After twice this year putting off his inflation target yet declining to step up monetary stimulus, Bank of Japan Gov. Haruhiko Kuroda has discouraged some analysts from thinking he’ll ever boost policy again.
Forty-four percent of economists surveyed by Bloomberg had expected a move by Kuroda at the meeting last Friday, with a further 22 percent projecting action sometime between December and April. With policy unchanged even as the central bank cut forecasts for growth and prices, some observers are now struggling to determine what it would take for the governor to pull the trigger for more asset purchases.
“The possibility of further easing is highly unpredictable,” said Kyohei Morita, the chief Japan economist for Barclays Plc. “The BOJ has become something I don’t really understand,” said Morita, who’s been analyzing the Japanese economy for more than two decades.
Kuroda and his fellow board members said in their report Friday detailing updated economic projections that the slide in oil prices was to blame for reduced consumer-price forecasts for the coming two years. The bank now sees its inflation target being reached around the six-month period through March 2017. It had originally forecast about two years when Kuroda launched his program in April 2013.
Eight of the 15 economists who responded to a snap poll by Bloomberg on Friday afternoon said they now see no further monetary easing from the central bank. One forecast a change in November, another projected December and five pointed to January as the next likely time for a move.
“What we learned is that the BOJ won’t apply monetary policy to meet its time frame commitment,” said Morita, who had forecast an increase in purchases of government bonds and exchange-traded funds. He now sees no likelihood of a change in policy in the foreseeable future and added that “it’s almost meaningless to predict it on the premise of the BOJ’s new commitment on the time frame.”
Kuroda defended the decision to keep policy unchanged, saying that the central bank isn’t losing credibility and that its actions so far — implementing an unprecedentedly large monetary stimulus program — are having the intended effects. The timing of reaching the inflation target depends on oil, he said. Kuroda, 71, reiterated that the BOJ won’t hesitate to adjust policy if necessary.
Hideo Kumano, the chief economist at Dai-ichi Life Research Institute, also switched from projecting a boost last week to now seeing no further stimulus.
“Kuroda delivered the message that he won’t move until a huge shock takes place in Japan’s economy,” said Kumano, who is a former BOJ official. “Mere swings in the economy won’t convince the BOJ to move.”
Despite standing pat, Kuroda said at a briefing after the policy decision that he didn’t see limits to any further policy steps and that he didn’t think a limit on buying Japanese government bonds would come soon.
Daiju Aoki, an economist at UBS Securities Japan Co. who had forecast more stimulus last Friday, pushed his forecast out to November.
“I don’t think this is the end — expectations for easing will be carried over to coming months,” said Aoki. He added that the BOJ has risked “putting itself behind the curve” and is becoming “reactive” to events.
The BOJ board now sees prices rising 0.1 percent this fiscal year, down from 0.7 percent before, and 1.4 percent next year. The bank also said that risks to the outlook for the economy and prices are skewed to the downside.
Investors should look at factors such as politics, the exchange rate and stock prices rather than the inflation outlook to evaluate the possibility of further BOJ easing, Chotaro Morita at SMBC Nikko Securities Inc. wrote in note Monday. Before last week’s decision, Morita forecast the bank would add to easing in March 2016.
The BOJ’s board voted 8-1 to continue expanding the monetary base at an annual pace of ¥80 trillion ($664 billion). Government officials and the finance minister had talked down the need for more stimulus in the run-up to the meeting.
The board next meets Nov. 18 and 19.