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BOJ expected to keep policy steady until 2020

BloombergTOKYO (Bloomberg) — The Bank of Japan will keep monetary policy unchanged at its Sept. 18-19 meeting, according to all economists polled by Bloomberg. A majority point to the central bank staying on hold until after a sales-tax increase that could hurt the economy next year.

Some 57 percent of the 51 respondents said the most likely timing for the next shift would be in 2020 or later, and the overwhelming majority predicted tightening rather than easing. The poll was conducted from Sept. 5-11.

After policy adjustments made at the last meeting in July, economists now expect the central bank to wait and see how the economy responds to next October’s scheduled tax increase before making further changes. Previous hikes in the levy, which is set to rise to 10 percent from 8 percent, were followed by recessions.

Governor Haruhiko Kuroda tweaked policy in July to make it more sustainable and promised to keep interest rates low for an extended period of time. The combination of allowing targeted bond yields to move in a wider range and introducing forward guidance left market players split over whether the BOJ had effectively tightened or eased its policy.

Given two choices to characterize the moves by the bank in July, 79 percent of respondents in the survey described them as a “stealth tapering,” while the rest said they represented a “strengthening of easing commitment.”

The moves by the bank came partly in response to criticism that the side effects of the BOJ’s easing program were distorting markets.

Only 4 percent of the economists polled this month said the BOJ had taken sufficient action to relieve the side effects. Some 69 percent said the BOJ had done “a little” to reduce the side effects.

The BOJ watchers also said the central bank would continue to struggle to hit its 2 percent inflation target, with 44 percent of the view that it’s unlikely to ever reach the goal.Speech

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