(Updates yen in final paragraph.)
Governor Haruhiko Kuroda, who unleashed unprecedented monetary stimulus at the Bank of Japan in 2013 and doubled down on it last year, is done expanding his efforts, according to an increasing number of economists.
Forty-six percent of respondents in a Nov. 13-17 Bloomberg poll don’t expect the BOJ to boost its current pace of asset purchases -- up from 33 percent last month. All 41 economists predicted no change at the BOJ’s policy meeting ending on Thursday.
The results are in stark contrast to last month’s survey when 44 percent of economists predicted that the BOJ would add to its already-record stimulus on Oct. 30. Yet the shift doesn’t stem from analysts thinking policy makers will succeed in achieving their new -- delayed -- target of October 2016 to March 2017 for 2 percent inflation.
They’re virtually unanimous in saying that won’t happen. Postponing the timing of meeting the inflation target at the last meeting without adding to easing undercut the view that a delay in reaching the target would compel the bank to ramp up its asset purchases.
The nine-member board will meet just days after a report on Monday showed Japan’s economy contracted last quarter, the second recession since Prime Minister Shinzo Abe took office in 2012. While some analysts said the data increases pressure on the BOJ to act, many said they don’t expect that the second straight quarterly decline in gross domestic product will push the BOJ to expand stimulus, according to the survey.
“Chances for additional easing are low,” said Kyohei Morita, an economist at Barclays Plc who doesn’t expect more easing at this or any meeting, after predicting an expansion of stimulus on Oct. 30. “It’s hard to imagine now that the BOJ will allocate all tools to meet the 2 percent inflation target as soon as possible.”
The bank kept policy unchanged last month even though board members were aware of the weakness in the economy and that inflation expectations have stalled -- indicating that the GDP report is unlikely to spur further easing now, Morita said.
Economists at JPMorgan Chase & Co. and BNP Paribas SA said the GDP report wasn’t entirely negative as a drop in inventories suggests that companies are clearing their stockpiles and may need to increase output.
Kazuhiko Ogata, an economist at Credit Agricole SA, had a different take on the GDP report, saying it gives the BOJ a reason to act if Kuroda wants to do so.
“There is no mistake that two consecutive quarters of contraction put the BOJ in a tougher position,” Ogata said. “I maintain my main scenario for easing in December while the action this week can’t be ruled out. Kuroda is basically aiming to surprise.”
The BOJ’s next policy meeting will be Dec. 17-18, just after the U.S. Federal Reserve is expected to raise interest rates, based on comments by Fed officials who last month held out the possibility of a December rate increase.
Some economists are taking a harder look at the yen for clues as to the timing of BOJ action. If the currency strengthens to above 110 yen per dollar, that could push the bank to change policy, according to Daisuke Karakama, an economist at Mizuho Bank Ltd.
A significant appreciation in the currency would hurt exports, profits and share prices for Japanese companies. The yen was trading at 123.28 per dollar at 5:50 p.m. in Tokyo. A strong yen would reduce overseas profits when repatriated for such Japanese companies as Toyota Motor Corp. and Nissan Motor Co.
--With assistance from Dru Ann Love.
To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net; Masahiro Hidaka in Tokyo at mhidaka@bloomberg.net; James Mayger in Tokyo at jmayger@bloomberg.net To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net James Mayger, Jodi Schneider
