Japan’s central bank is far from done driving down the yen if it wants to secure a 2 percent inflation target next year, a survey of economists by Bloomberg News shows.
The median estimate of 27 economists in a survey March 5-10 shows that the yen needs to fall to 140 per dollar, a level last seen in 1998, to help the Bank of Japan meet its goal. Even after a 23 percent decline since Governor Haruhiko Kuroda began record monetary stimulus, that means a further 13 percent drop from the current level.
Kuroda and his colleagues are projected to step up their stimulus later this year, once it becomes clear that it’s unlikely to achieve a 2 percent increase in consumer prices in or around the 12 months starting in April, a separate survey shows. What’s unclear is whether politicians, Japan’s trading partners and the small companies hurt by a weaker yen would tolerate actions that sent the yen down so much.
“The BOJ needs a much weaker yen to achieve the 2 percent target,” said Yasuhide Yajima, an economist at NLI Research Institute, who was one of three in the survey who said a rate of 150 was required for inflation to reach the BOJ’s goal. “I don’t think the yen will weaken that much, but if it does, that’s likely to spur discontent among households and small companies.”
Source : Bloomberg