-Takeshi Minami, chief economist at Norinchukin Research Institute
Inflation outlook is under a threat. This can be noticed when having a look at the latest fundamental data from the world's third largest economy. Moreover, the upcoming tax hike will become a massive drag on the domestic consumptions, leaving consumers with less cash to spend. Therefore, analysts expressed their concerns about reaching a 2% inflation within a planned period.
Central bank's Governor Haruhiko Kuroda, however, is constantly reiterating his confidence about economic strength. This time he pointed out the economy is on the track to meet the 2% inflation target, sounding confident about the effects of Shinzo Abe's stimulus programme put in place about a year ago. Kuroda claimed the economy will continue expanding above its potential even after a consumption tax hike, while also adding the BoJ will adjust its monetary policy if it is needed.
Next week's inflation report will be final piece of the puzzle before April 1. Weaker-than-expected CPI data can force the central bank to expand its already unprecedented stimulus during April's meeting. Shinzo Abe's advisor Koichi Hamada said the BoJ should double its annual pace of bond purchases to 100 trillion yen. He considers May will be the appropriate time for introduction of the additional stimulus, as the 3% tax rise will damage the economy.
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