- Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute
While the Japanese economy has been faltering recently, inflation is stalling and economic outlook has dimmed further, analysts weigh whether the Bank of Japan will ease monetary policy this year or wait until 2015 to kick-start growth. Economists believe that the central bank will fail to reach the desired 2% inflation goal before April, and thus the BoJ will be forced to make the policy even more accommodative. The central bank cut its growth outlook for this fiscal year to 1.0% and expect the economy to expand at the 1.5% pace next year.
In the meantime, Vice Economy Minister Yasutoshi Nishimura calls for the government to be more cautious about a decision on lifting the national sales tax than it was on the previous hike as the economy reaches a "make-or-break point". Nishimura is concerned about the effect of the April 1 tax hike on consumption, which appeared to be prolonged, saying the government is ready to embark on fresh fiscal stimulus to support the economy. Prime Minister Shinzo Abe is to decide by the end of the year whether to proceed with a planned rise of the tax to 10% next year after raising it to 8% from 5% in an attempt to curb Japan's runaway government debt. Koichi Hamada, an adviser to Shinzo Abe, thinks that Japan could soften the effect of a planned sales tax increase by raising it gradually in stages rather than in a single hike.
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