business‎ > ‎

Bank Of Japan Set To Hang Up Its 'Bazooka'?

posted 22 Jan 2014, 07:48 by Mpelembe   [ updated 22 Jan 2014, 07:48 ]
Reuters Business  Report - The Bank of Japan's first big meeting of 2014 ends with few tweaks to monetary policy, and there's good reason why board members are content to stay put for now.

With Abenomics in its second year the economy is showing more signs of life.

Japan Inc. is finally investing more, with machinery orders at a five-year high. And prices are rising even faster than the BOJ's own forecasts.

Consumer prices climbed 1.2% in November, passing the halfway mark to the bank's 2% inflation target.

But investors are still predicting the central bank will struggle to meet that goal, especially with a sales tax hike in April likely to hurt consumption.

A Reuters poll of 14 economists forecasts a mere 0.9% rise in CPI in the next fiscal year.

BOJ governor Haruhiko Kuroda has pledged to act 'without hesitation' if the central bank's price target is threatened.

So, the question seems to be not if more stimulus is on the way but when, and how much. JPMorgan expects the BOJ to boost bond-buying as early as April.

But there's also a brave minority of economists predicting no changes in policy this year.

Junko Nishioka at RBS Securities says she belongs to the so-called 30%. Her reasoning -- recent economic data is encouraging enough that the central bank won't act without a major shift in external conditions.

While that might disappoint the markets, it could be the best news for Japan long-term.

The country's debt levels are the highest in the developed world, and a recent government report warned it's in danger of missing its budget balancing target.

Prime Minister Shinzo Abe has so far been able to count on BOJ backing for his economic revival plans.


"But the economy picking up, and Japan's finances looking strained, this year the 'bazooka' central bank may be more gun-shy."