No cutting the slack
It could be 2018 before the Bank of Japan can embark on an exit strategy to stop its aggressive monetary easing policy aimed at easing deflation
The Bank of Japan may end up pursuing its massive monetary easing for up to five years before achieving inflation levels conducive to unwinding its aggressive stimulus, a poll of central bank watchers suggests.
The prospect of it taking far longer before the bank can begin tightening stands in stark contrast to expectations in global markets that the US Federal Reserve could taper off its huge bond-buying campaign as early as this year.
A former Bank of Japan board member, Nobuyuki Nakahara, one of the 10 economists and former bank officials surveyed, said: "At this point I don't see an exit for the bank. Europe's economy is extremely weak. It is also possible that China's economy could slow suddenly."
The Bank of Japan only embarked last month on its historic programme to flood the markets with US$1.4 trillion in cash over two years to reflate a limp economy that has suffered 15 years of deflation.
Governor Haruhiko Kuroda has said it was pointless to discuss an exit strategy now. But given the operational difficulties the central bank has faced in implementing its massive easing, participants in the Japanese government bond market are already wondering when and how the bank will be able to put its strategy in reverse.