The Bank of Japan (BoJ) looks to conduct more quantitative easing as the initial shot of Abeconomics wears of and the Japanese economy begins to slip. Exchange-traded funds (ETFs) are speculated to be targeted further in the next round of asset purchases, which is expected to take place between May and June.
The monetary base is expected to remain the same at ¥60-70 trillion yearly and doubling the purchases of ETFs, or ¥2 trillion. The central bank has the option to increase their government bond purchases (JGB) by ¥10 trillion.
The Japanese economy was a breakout economy in 2013, but higher consumer prices (the primary goal of the BoJ) is taking a toll on consumer spending ahead of April’s three percent sales tax hike. Economists originally forecasted an increase in consumption ahead of the tax, but higher inflation is hindering purchasing. The BoJ is expected to go all out on a asset buying spree to try and relight the spark within the economy.
The BoJ has been on a crusade to end the 15-year deflation. The benchmark consumer price index rose to 1.3 percent with the BoJ aiming the gold standard two percent target. However, it is still uncertain of the risks of all this monetary easing.
The BoJ likely has no idea on how to exit such a massive plan or how they will keep inflation from spiraling out of control, as officials keep a tight lid on relating information.
The combination of higher inflation, higher taxes, and lower wage growth will probably take the BoJ to the point of no return.