Corporate Japan's Minimal Inflation in 3 to 5 years

Minimal inflation is anticipated by the corporate of Japan that is likely to remain in the next three to five years, based on the survey by the central bank on Tuesday. This accentuates the obstacle of the central bank to reach their target inflation rate of two percent.

On the last survey by the Bank of Japan, Consumer prices presumed growth is 0.8 percent in the next 12 months, similar to the forecast three months ago.

On the other hand, corporate anticipates consumer prices to increase by 1.1 percent annually after three years and will continue to be 1.1 percent five years from now, based on the forecast three months ago.

The BOJ implemented a massive stimulus program since five years ago trying to shift the change of minds to deflationary mindset and raises anticipation corporate and household inflation.

Price growth fails to rise that resulted to the revision of its policy framework in 2016 to counter the long-term battle against deflation, although the outcome has been satisfactory.  

Japan’s economy grew for eight quarters which can be considered as a long continuous progression of 12 quarter between the second quarter of 1986 and first quarter of 1989 amid the peak of Japan’s economic bubble. However, this period of growth has been slow that means higher consumer prices.

The nationwide core consumer price index increase by 1.0 percent in February last year which is on par with the median estimate from the reports last week. This includes oil products but not volatile fresh food costs. Yet, a smaller data of growth excluding fresh good and energy rally to the annual value of 0.5 percent in February, implying a sluggish movement of underlying inflation.

The Tankan surveys as factors to be considered by the BOJ board is being studied during the two-day rate review ending on April 27.

The meeting composed of BOJ’s two new deputy governors. Masazumi Wakatabe was appointed by the former Prime Minister Shinzo Abe, known for his aggressive monetary stimulus advocate on one of the posts.

The re-appointment of Governor Haruhiko Kuroda signifies the resumption of the current monetary policy.

Even so, there is uncertainty if the appointment of Wakabe will change the policy board into additional easing given the difficulty in attaining the price target of the central bank.

The expectations for the inflation was influenced by the BOJ Tankan survey of business confidence, reflecting the negative outcome of big manufacturers for the first in two years amid the appreciation of the Japanese yen and trade friction with the United States.