"It is too early to judge whether additional monetary easing will be necessary when the levy is raised in April. The BOJ has said they have done enough, and will do more if necessary, but collecting evidence supporting the need to do more will take a lot of time."
- Atsushi Mizuno, vice chairman at Credit Suisse AG
In light of the signs of economic amelioration and following Shinzo Abe's decision to raise consumption tax in April the formed BOJ board member Atsushi Mizuno said the central bank is likely to stay in a "wait-and-see" mode at least until the second quarter of 2014 before deciding whether to add more stimulus. The majority of economists are now expecting Japanese central bank to loosen its policy further by June in order to support the economy in the wake of the first sales tax hike since 1997. Even despite a five trillion yen fiscal package, which was already promised by Abe to cushion the blow, a setback to growth would complicate the BOJ's efforts to achieve a 2% inflation within two years.
The ultra-loose monetary policy introduced in April has already helped weaken the Yen around 20% against the greenback, bolstering exporters' profits. Furthermore, strong sentiment among producers, which hit the highest since global credit crisis in 2007, suggesting manufacturing sector will continue boosting economic growth. At the same time, the analysts believe it would be harder for the BOJ to keep increasing the monetary base at the current pace, as the financial institutions, from which the BOJ buys debt, may become less inclined to give up their government bonds in return for BOJ's deposits that yield just 0.1%.
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