BANK OF JAPAN (BoJ) officials see a sizable impact from government stimulus announced last week, raising the likelihood that the bank will upgrade its economic forecasts for the first time in a year next month, according to people familiar with the matter.
The possibility of higher growth projections would likely strengthen a building view among economists that the BoJ will stand pat on key policy measures at its meeting next week and for some time to come, barring unexpected developments in US-China trade talks, markets or economic data.
The BoJ doesn’t revise its growth projections until January, when it next issues quarterly forecasts.
The package announced last week by Prime Minister Shinzo Abe includes 13.2 trillion yen ($121 billion) of fiscal measures to support an economy facing an export slowdown, typhoon damage and the fallout from a recent sales tax hike. While the economy grew in the first three quarters with the support of domestic demand, it is forecast to shrink 2.6% in the last three months of the year.
Officials at the BoJ expect the government’s stimulus to boost growth from the next fiscal year starting in April, the people said. The central bank’s projections are likely to be largely in line with the government’s view, according to some of the people.
The government said its fiscal measures will boost growth by 1.4 percentage point over time, but hasn’t made clear the specific impact for the next fiscal year.
Economists have cast doubt on the government’s figure for boosting growth, but they largely agree that the package makes it easier for the BoJ to hold off on extra stimulus. Analysts at banks including Barclays Plc and JPMorgan Chase & Co. are telling clients they should no longer expect the BoJ to ease anytime next year.
When the Abe administration introduced economic stimulus measures in 2016, the BoJ raised its growth forecast for the following fiscal year to 1.3% from 0.1%. — Bloomberg