BOJ’s next move is to dial back stimulus, economists say

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    Bank of Japan (BOJ) Governor Haruhiko Kuroda attends a news conference at the BOJ headquarters in Tokyo. The BOJ is set to keep monetary policy steady this week as receding fears of a disorderly Brexit and signs of progress in US-China trade talks take some pressure off the central bank to use its dwindling ammunition to underpin growth. (Reuters Photo)
    Bank of Japan (BOJ) Governor Haruhiko Kuroda. (Reuters Photo)

    By Kaori Kaneko

    TOKYO- The Bank of Japan’s next move will be to dial back its massive stimulus, according to an increasing number of analysts polled by Reuters, reflecting receding market expectations of imminent monetary easing by the central bank.

    But any such withdrawal of stimulus will begin from 2021 at the earliest, the survey showed, a sign that monetary policy in Japan could be in a holding pattern for the time being.

    “There’s a chance growth in overseas and Japanese economies could pick up next year,” said Nobuyasu Atago, chief economist at Okasan Securities.

    “The yen is stable and stock prices are firm,” which could allow the BOJ to hold off on expanding stimulus, he added.

    Twenty-five of 41 economists, or 61 percent of the total, expect the BOJ’s next move to be a withdrawal of stimulus, the poll taken between Dec. 4-16 showed. That was up from 44 percent in a survey in November.

    Most of them say it could happen in 2021 or later.

    Sixteen of the economists, or 39 percent, think the BOJ will top up stimulus as its next step, down from 56 percent in last month’s survey.

    The BOJ is set to keep monetary policy steady this week as receding fears of a disorderly Brexit and signs of progress in US-China trade talks take some pressure off the central bank to use its dwindling ammunition to underpin growth.

    Japan’s core consumer price index, which includes oil products but not fresh foods, is forecast to rise 0.6 percent this fiscal year and next year – well short of the BOJ’s 2 percent inflation target.

    Japanese policymakers have been under pressure to do more to underpin a fragile economic recovery, hit by the global trade war, typhoons and a sales tax hike that rolled out in October.

    The world’s third-largest economy is forecast to have shrunk by an annualized 3.2 percent in the fourth quarter, which would be the biggest contraction since April-June 2014, the poll found.

    “Consumer spending is expected to worsen sharply in the current quarter as the tax increase puts a burden on households,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

    “Capital spending also likely weakened after having boosted before the tax hike. The economy will pick up next year but the pace of recovery is expected to be moderate.”

    Growth will rebound by 0.9 percent and 1.2 percent in the first and second quarters of 2020, according to median forecasts. The economy will expand 0.9 percent in the current fiscal year ending in March 2020 before slowing to 0.5 percent the following year, the poll predicted. – Reuters