Corporate Japan expects to see only minimal inflation over the next year and barely any change looking ahead three to five years, a central bank survey showed Tuesday, highlighting yet again the difficulty the Bank of Japan faces in reaching its elusive 2 percent inflation target.
Companies surveyed by the BOJ expect consumer prices to have risen 0.8 percent a year from now, unchanged from their projection three months ago.
Firms also expect consumer prices to have risen by an annual 1.1 percent three years from now and 1.1 percent five years ahead, also unchanged from three months ago.
The BOJ deployed a massive stimulus program in 2013 in the hope of shocking consumers out of their deflationary mindset and boosting corporate and household inflation expectations.
After failing to make much headway on price growth, the BOJ revamped its policy framework in 2016 to one better suited to a long-term battle against deflation, although its results have been modest.
The economy has expanded for eight quarters, the longest continuous expansion since a 12-quarter stretch of growth between April-June 1986 and January-March 1989 around the height of the economic bubble.
But this record run of growth has been slow to translate into higher consumer prices.
The nationwide core consumer price index, which includes oil products but excludes volatile fresh food costs, rose 1.0 percent in February from a year earlier, matching the median estimate, data last week showed.
However, a narrower measure of consumer prices that excludes fresh food and energy rose an annual 0.5 percent in February, highlighting the snail’s pace of underlying inflation.
The tankan surveys will be among factors for the BOJ Policy Board to scrutinize when it meets for a two-day rate review ending April 27.
The meeting will be the first to include the BOJ’s two new deputy governors. Prime Minister Shinzo Abe appointed Masazumi Wakatabe, an academic known as a vocal advocate for aggressive monetary stimulus, to one of the posts.
Masayoshi Amamiya, a career central banker, was appointed to the second deputy governor post.
Gov. Haruhiko Kuroda was re-appointed, which suggests the BOJ will maintain policy continuity.
However, there is some uncertainty over whether Wakatabe’s appointment will shift the Policy Board toward additional easing given the difficulty in meeting the central bank’s price target.
The inflation expectations come after Monday’s BOJ tankan business confidence survey showed big manufacturers’ sentiment having worsened for the first time in two years on worries about a rising yen and trade friction with the United States.