The Bank of Japan's (BOJ) surprise decision to push back the date for achieving its two percent inflation target may signal the central bank is trying to buy time before admitting it needs to easing monetary policy again.
"It is far from clear that Quantitative and Qualitative Easing (QQE) has lifted inflation expectations among households and firms. In fact, expectations of future price rises may fall sharply in coming months as observed inflation may turn negative," Marcel Thieliant, an economist at Capital Economics, said in a note Thursday. "We therefore remain convinced that more monetary easing will be needed before too long."
Other analysts are also pointing to signs that inflation isn't cooperating with the BOJ's forecasts, but the central bank's unexpected move Thursday to give up its self-imposed goal of achieving its inflation target this year and instead target fiscal 2016 has spurred many to move back their forecasts for the next round of monetary easing.
Data released on Friday showed that inflation has crept up in March, albeit by just 0.2 percent on-year after adjusting for the three percentage-point consumption tax hike in April 2014.
The BOJ kept intact its 80 trillion yen ($668.20 billion) annual asset purchase, or QQE, program at its monetary policy meeting Thursday.
"The latest change in guidance and Governor [Haruhiko] Kuroda's press conference remarks suggest the board will instead adopt a wait-and-see stance in the near term," HSBC Japan economist Izumi Duvalier said in a note Friday. She has pushed back her forecast date for additional easing to the end of October 2015 from the end of the second quarter of 2015.
Others moved their forecasts back even further, with JP Morgan chief Japan economist Masaaki Kanno saying he now expects more easing in January or April 2016, compared with a previous forecast of July or October 2015.
One quandary for the BOJ is that its economic assumptions -- that rising wages would push up spending and eventually prices -- have been thwarted by the actual data.