- Hideo Kumano, chief economist at Dai-ichi Life Research Institute
Given the moderate but stable increase in consumer prices and stronger-than-expected growth in the first quarter, the Bank of Japan is likely to stay pat during its two-day meeting later this week and will dash private-sector hopes that additional stimulus will be launched anytime soon. There is a sizable number of experts and market participants, who are betting on more action in July. However, even this forecast looks unrealistic as central bank's governor reiterates that prices are on track to achieve the 2% inflation target within the planned period. Earlier, predictions of more action were based on expectations inflation will fall below 1% in summer, however, recent inflation data lower these speculations. During the unofficial meeting on May 26, the CEOs of brokerages and others in the securities industry expressed their hopes the central bank will add more easing measures. Amid them they named an increase in BoJ's purchases of exchange-traded funds that will provide additional boost to the stock market.
In the meantime, Japan's officials are expected to slightly raise its assessment of overseas economies, bolstering the case they are confident exports will pick up in the foreseeable future and will push the economy to a sustained recovery. Stronger exports from China, receding geopolitical risks from Ukraine and stronger hiring in the U.S. economy all led to a stronger confidence.
© Dukascopy Bank SA