The Bank of Japan will leave monetary policy unchanged this week, and probably for much longer, after Prime Minister Shinzo Abe unveiled a stimulus package to bolster growth, according to a Bloomberg survey.
All 45 economists polled expect no action from the bank at the end of its two-day Policy Board meeting Thursday. For the first time since April, a majority of economists now expect the BOJ’s next action will eventually be a tightening of policy, an indication of how abruptly expectations have changed since the last survey in October.
The Abe administration this month readied stimulus worth ¥13.2 trillion ($120 billion) in fiscal measures to help the economy cope with an export slump, recent typhoons and fallout from October’s consumption tax hike. Those measures have given the BOJ breathing room to hold off on using its depleted ammunition, according to economists.
The government’s fiscal measures will add 0.35 percentage point to Japan’s growth in the year starting in April, according to the median forecast of respondents.
Along with the government’s spending package, recent signs of an improving global economy and stability in financial markets were other reasons economists cited for changing their views.
The survey, conducted Dec. 9 to last Thursday, showed 58 percent of the economists now expect the BOJ’s next move to be tightening, rather than easing. In the October survey, 76 percent of economists said they expected additional stimulus from the bank by April. That number has now dropped to 9 percent.
Progress in U.S.-China trade talks reported last week after the survey closed and a U.K. election result that opened a clearer path to a Brexit deal could further strengthen expectations that the bank’s next move will be to rein in stimulus.