- Koichi Hamada, professor emeritus of economics at Yale University
Back into April 2013, during the first meeting as the Governor of the Bank of Japan Haruhiko Kuroda launched an unprecedented stimulus programme in order to boost growth and inflation. At that time USD/JPY was trading around 92 level. Kuroda made the depreciation of the domestic currency one of his main targets, and now, after the stimulus programme has been functioning for one year, the pair is changing hands around 103, ten-week high. Moreover, analysts believe the pair has a potential to soar to 112 this year. From the one side, the world's third largest economy is improving, with both growth and inflation rising steadily. However, it faces a serious risk from the April's tax hike. Despite fears it will damage the economy, the BoJ is projected to remain confident that its massive easing programme is on track to achieve Kuroda's ambitious 2% inflation target without additional measures. Therefore, the BoJ is likely to keep the pace of its stimulus programme at 60-70 trillion a year during this week's meeting.
At the same time, last week's Tankan poll suggests softer outlook, as companies of all sizes are growing increasingly wary over the outlook for the domestic economy. The BoJ is likely to cite improving labour market conditions, rising wages and a pickup in inflation expectations as factors supporting the achievement of the 2% inflation by spring 2015.
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