Poll shows Japanese firms see no BoJ tightening for the short term

TOKYO: Three-quarters of Japanese companies say the Bank of Japan (BoJ) needs to exit from its super-easy monetary policy but most do not see that happening until next year or beyond, a Reuters poll found.

The results of the monthly Reuters Corporate Survey come as central bank Governor Haruhiko Kuroda – reappointed for a second term – and his two new deputies are set to begin their terms, aiming to spur economic growth and drive inflation to the central bank’s so-far elusive target of 2%.

With inflation struggling to accelerate even after five years of Kuroda’s aggressive monetary stimulus, the central bank is in no mood to rush to exit, although the governor flagged the possibility if the inflation target is met in fiscal 2019 – a remark he tempered later.

The BoJ has reduced the amount of government bonds it buys under its super-easy policy, in what traders call ‘stealth tapering’. When exiting, market sources said they would expect the central bank to raise its 10-year bond yield target, although most of them predict no such move this year.

Of some 240 companies that responded to the survey, 74% agreed on the need for the BoJ to pull back from its easy monetary policy and two-thirds expected the BoJ’s next move to be a tightening of policy.

However, nearly three-quarters did not expect BoJ action this year.

The biggest portion of respondents at 38%, did not expect the BoJ to change policy until sometime in 2020 or later.

Most analysts predicted the central bank of firms would keep the long-term bond yield target at zero percent throughout the year, a Reuters poll showed last month.

The monthly poll, conducted March 1-March 15 on behalf of Reuters by Nikkei Research, polled 542 big and medium-sized firms with managers responding on condition of anonymity.

The survey found that just over a third of respondents wanted the government to delay a planned rise in the sales tax in 2019, compared with two years ago when 61% of firms backed Abe’s decision to delay a tax hike that had been planned for 2017.

However, some 63% of respondents say fiscal spending would be needed to offset any potential economic damage from the planned tax hike. Abe has ordered cabinet ministers to consider ways to offset the impact of a higher sales tax on consumer spending.

The government has twice-delayed a sales tax increase to 10% from the current 8%. When the tax was last increased in 2014, consumer spending was hit hard and the economy suffered a downturn.

Corporate views are split on the impact of the yen’s appreciation towards 105 yen earlier this year, with 39% saying it dented quarterly profits and 18% seeing it contributing to profit gains.

Manufacturers were hit harder, with 57% saying the yen’s gain dented their profits compared with 18% of non-manufacturers. “Taken together, Japanese firms can cope with the yen’s rises as long as the move is gradual to around 105 yen. — Reuters