BOJ Watchers Push Back Expectations for Policy Adjustment

(Bloomberg) -- Compared with a month ago, only half as many economists now expect the Bank of Japan to adjust its monetary policy this year -- and none expect action at Friday’s meeting.

Only seven of 47 economists surveyed by Bloomberg said they expect any change this year, down from 14 in March. Most see no change until at least April 2019. During Group of 20 meetings last week, Governor Haruhiko Kuroda said the central bank will continue its easing, given that it’s still distant from its price target.

The board currently forecasts that inflation will approach 2 percent around the fiscal year starting April 2019. Kuroda unexpectedly said on March 2 that the bank would probably be considering the details of any unwinding of stimulus from then.

The two-day policy meeting ending on Friday will be the first for two new deputy governors, including Masazumi Wakatabe, who repeatedly called for more easing prior to being nominated to the board. However, based on Wakatabe’s answers at his confirmation hearings in parliament, many of the economists surveyed said they expect him to vote with the rest of the board this week.

“I expect Deputy Governor Wakatabe to agree to the current policy direction,” said Yuji Shimanaka, chief economist at Mitsubishi UFJ Morgan Stanley. “However, it’s possible he’ll request that the BOJ try to keep to its 80 trillion yen purchases of government bonds as much as possible, and modify the current lag in purchases.”

Shimanaka was referring to the difference between the amount of assets the BOJ says it will buy every year, and what it actually does. The BOJ’s stated target is to increase its holdings of government bonds by 80 trillion yen ($742 billion) a year, but in the year through the end of March it only added about 50 trillion yen worth to its balance sheet.

--With assistance from Cynthia Li

To contact the reporters on this story: Yuko Takeo in Tokyo at ytakeo2@bloomberg.net, Masahiro Hidaka in Tokyo at mhidaka@bloomberg.net.

To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net, James Mayger, Henry Hoenig

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