Reuters' latest poll also shows economists expects the BOJ to normalise monetary policy as next course of action
- 40 of 41 economists say government will raise sales tax to 10% in October
- 24 of 40 economists say BOJ's next step will be to normalise policy
They expect the sales tax hike to knock Q4 GDP into contraction territory but overall 2019 GDP growth is expected to be at +0.5% (down from the +0.6% forecast in March). Economists also see no change to Japan's inflation outlook, maintaining core CPI forecasts of +0.7% for 2019 and +0.8% in 2020.
Mind you, those are nowhere near levels needed for the BOJ to normalise monetary policy. In short, don't expect the BOJ to be able to do so any time soon. If anything, they have been more cautious lately given the state of the global economy.
As for the proposed sales tax hike, I wouldn't say it's a given at this point. The government does sound confident but if Q3 economic growth begins to stall and global growth conditions worsen from hereon, it could still potentially be scrapped once again.
