BoJ to decide on further stimulus by mid-May, says Abe aide

TOKYO — The Bank of Japan (BoJ) could decide as soon as the middle of May whether further stimulus is needed to keep inflation on track for its 2 per cent target, with the decision weighing heavily on the impact of a sales tax bump next month, an adviser to Prime Minister Shinzo Abe said.

“If the BoJ judges that the economy has fallen off its projected path, it will act appropriately and flexibly, and further easing is possible,” Mr Etsuro Honda said in an interview at the Prime Minister’s Office here on Tuesday. “I believe the BoJ will act if it sees changes in price expectations.”

While Mr Honda said he had become more confident that the economy would withstand the higher levy as inflation expectations take root and price gains accelerate, the first indications of the extent of the blow would appear in May. He said he saw “considerable” room for the BoJ to boost the pace that it buys exchange-traded funds should it deem more stimulus is needed.

If leading economic indicators that reflect outlooks for sales, profits and inflation do not show a big dent as a result of the sales tax increase, further easing would not be needed, Mr Honda said.

The economy is forecast to contract by an annualised 3.5 per cent in the three months from April, when the sales levy will rise to 8 per cent from 5 per cent. Consumer prices excluding fresh food — the BoJ’s main inflation gauge — rose 1.3 per cent in January from a year earlier, the fastest pace since 2008. Bloomberg