Japan's third quarter economy seen growing more slowly, BOJ may wait on stimulus: Reuters poll

[September 14, 2015]  By Kaori Kaneko

TOKYO (Reuters) - Japan's economy will likely grow much less in the current quarter than projected a month ago and consumer prices remain weak, but many economists expect the Bank of Japan will not announce more stimulus till next year, a Reuters poll showed.

Some, however, forecast the BOJ could ease policy next month on concerns China's economic woes and recent financial market turmoil would be a drag on the Japanese economy.

Japan's economy, the world's third largest, shrank in the second quarter on weak business investment, which prompted economists to revise down their third-quarter growth forecasts.

The central bank expects its 2 percent CPI target will be achieved by September next year but the poll sees consumer prices rising at only half the rate of what the BOJ is aiming for.

"We expect the BOJ will likely ease next January," said Masamichi Adachi, senior economist at JPMorgan Securities Japan.

"But looking at recent economic data, it is even more difficult for the BOJ to achieve its price target. Thus, chances have grown for the central bank to adopt further easing this year, especially at the Oct. 30 meeting," he said.

The majority of economists surveyed said the BOJ's next policy move would be to expand stimulus measures.

Twelve economists out of 18, with forecasts for when the BOJ might possibly ease, said it would likely be some time next year. Five said the central bank might ease at its Oct. 30 meeting and one said in November. The poll was conducted between Sept. 8 and 11.

BOJ policymakers are in no mood to expand monetary stimulus this week, sources familiar with their thinking say, even as poor data challenges their presumption that economic recovery will boost inflation to its 2 percent target next year.

Kozo Yamamoto, a ruling party lawmaker and close economic aide to Prime Minister Shinzo Abe, told Reuters that the BOJ can hold off on action this week but should expand stimulus as early as its meeting on Oct. 30 to counter weakness in the economy.

BOJ Governor Haruhiko Kuroda has kept his upbeat view on the economy and his ambitious price target in place even amid rising scepticism it can be met as growth slows.

Economists expect the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, will rise only 0.1 percent this fiscal year to March 2016 and 1.0 percent next fiscal year, the poll showed.

These compare with 0.3 percent and 1.2 percent projected last month, respectively.

But sources told Reuters the BOJ's CPI index, separate to the one produced by the government, accelerated to 0.9 percent year-on-year in July, faster than a 0.7 percent annual increase in June.

The economy will probably grow an annualized 1.3 percent in July-September, the poll of 26 economists showed, sharply down from a 2.2 percent expansion projected in August.

Asked how seriously China's slowdown and market turmoil will affect the Japanese economy, most said they would slightly affect the economy and only two said damage would be serious.

"The impact from China's economic slowdown has spread to other Asian nations. Japan's export recovery may be delayed," said Takumi Tsunoda, senior analyst at Shinkin Central Bank.

(Polling by Shaloo Shrivastava and Aaradhana Ramesh; Editing by Jacqueline Wong)
 

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