Prime Minister Shinzo Abe's campaign pledge to expand free education may come with an unintended consequence: a hit to the Bank of Japan's efforts to spur inflation.
Economists from Barclays Securities Japan Ltd. to Nomura Holdings Inc. and IHS Global KK see the likelihood of a significant — though probably temporary — drag on the BOJ's benchmark consumer price index.
"There's no doubt that it will put downward pressure on core CPI," said Harumi Taguchi, principal economist at IHS in Tokyo. "The year that education costs are brought down, it will definitely have an effect. The impact should last at least for that year," she said.