The latest survey of economists by Bloomberg, published late Wednesday, showed that Bank of Japan (BOJ) Governor Haruhiko Kuroda is unlikely to move toward normalization in the final months of his term, even if inflation hits 3%. The findings also raised the possibility of a policy change if the inflation marks a prolonged spell at that level (3.0%).

Key findings

"While economists say that half a year of core inflation at 3% may trigger a policy shift, that’s not their base case. Japan forecasters expect inflation to hit 2.5% in the final three months of 2022 and then peak out toward 1% at the end of next year."

"BOJ watchers have seen Japan’s key price measure come in above the central bank’s 2% target for four straight months and continue to pick up speed."

"But 16 of 19 analysts said that a further acceleration to 3%, the highest since 1991 excluding tax-hike years, wouldn’t increase the likelihood of policy change before Kuroda’s term ends in April."

"Economists have flagged that inflation isn’t the sole metric that would trigger a policy shift. They cite the need to also look at the state of paychecks, the impact from any slowdown in the global economy and moves in the yen."

"If Prime Minister Fumio Kishida finds inflation well above target too painful for households and businesses, he could still put the central bank under pressure."

"Bond market expectations that Kuroda’s replacement may consider tweaking policy in the first few months after he steps down next April have begun to edge higher again."

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