-Stefan Grosse, NORD LB
While Japanese policy makers are desperately trying to revive growth in the world's third biggest economy following the devastating sales tax increase in April 2014, as the deadline for reaching inflation goal is looming, economists revised their forecast for a fifth straight month, claiming that the probability the Bank of Japan will meet its 2% inflation goal by the next fiscal year equals to zero. Demand is still subdued following the increase of the levy, while factory output is disappointing, which make experts predict the central bank would easy monetary policy further before the fiscal years ends in March. The BOJ launched unprecedented of monetary stimulus last April in attempt to revive the economy, pledging to double the monetary base to 270 trillion yen over two years, which has seen the Yen losing about 15% against the US Dollar. However, economists doubt effectiveness of central bank's measures in bringing inflation to the desired level. Consumer price inflation without the April sales tax hike effect will probably rise 1.1% in this fiscal year and next. However, with oil prices plunging sharply, all central banks will soon experience lower inflation, which is particularly worrying for the BoJ and the ECB as deflation risks loom. That means inflation forecasts are likely going to be revised downwards in coming months. The economy is likely to grow a timid 0.2% for the fiscal year to March 2015 down from a 0.3% outlook made last month and dropping from a 1.0% growth forecast in May.
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