"The BOJ will have to ease policy next year, because inflation will not accelerate again."
- Societe Generale Securities
Consumer price index in the world's third largest economy declined further in August, as year-on-year prices' increase reached 1.1%, not taking into account the rise in sales tax back in April of this year. Therefore, the indicator fell from 1.3% in July, hitting the 10-month lowest level and raising serious concerns about future of monetary policy in the country. Core CPI recorded the highest increase in April and since then started to decrease gradually. The Bank of Japan took extraordinary measures to heat up economic activity, growth and inflation, pumping funds into the real sector of Japanese economy. Also, economists mention that weaker Yen was not able to support increase in prices, which it should provide for imported goods, such as minerals and fuel. However, at the moment global energy prices are experiencing a period of stagnation or even decline. The latest data raises more questions about necessity of extra stimulus program in Japan. Moreover, it increases fears that the second advance of sales tax to 10% in the foreseeable future may push the CPI down even more. President of the Bank of Japan Haruhiko Kuroda does not exclude such an option, but estimates that inflation will return back closer to the 2% target towards the end of fiscal year in March 2015. A third of analysts predict the new support program to start working by the end of this year, while another 30% of them forecast the new money injections to take place around April of the year 2015.
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