TOKYO: Bank of Japan policymakers will likely vote on Wednesday to continue their asset-buying spree launched two years ago, but with waning conviction of success as inflation slows further from their ambitious 2 percent target and the economy struggles.
When it launched its massive stimulus programme in April 2013, the BoJ pledged to achieve 2 percent inflation in roughly two years in a country mired in 15 years of deflation.
With the deadline having passed, the central bank continues to gobble up around the same amount of government bonds issued each month.
Its balance sheet has expanded by 156 trillion yen ($1.3 trillion), roughly the size of Australia's economy.
But the economic recovery remains fragile and inflation has ground to a halt, casting doubt on the BoJ's argument that its massive money printing will pull Japan out of stagnation by nudging households and companies into boosting spending.
Having missed the two-year deadline, the BOJ now says inflation will hit 2 percent around the year ending in March 2016. But even that deadline is proving elusive as prices are seen staying flat or falling for much of this year on low energy costs and tame wage growth.
At its two-day rate review ending on Wednesday, the BOJ is likely to hold off on expanding its asset-buying programme, while laying the groundwork for a more critical meeting on April 30 that will produce new long-term forecasts. It is also seen maintaining its rosy assessment that Japan's economy is headed for a moderate recovery on robust exports.
Some market players, albeit a minority, say the BOJ may ease again on April 30 if consumer spending remains weak and forces the bank to cut its bullish price forecasts.
But some central bankers doubt whether buying more assets will give any meaningful boost to economic activity, pointing to a lack of a clear pick-up in capital expenditure despite the massive money printing so far.
Many BOJ officials are hoping that rising wages and the benefit from lower fuel bills will lift consumption and help accelerate inflation toward year-end.
With the outlook so uncertain, the BoJ appears to be in no mood to celebrate the second anniversary of its stimulus.
A year ago, when inflation was comfortably above 1 percent, Governor Haruhiko Kuroda proudly preached to new graduates joining the central bank of the need to "meet deadlines" for work.
There was no mention of meeting deadlines in his speech last week, when he told newcomers in the central bank that people should always be ready to correct mistakes of tthe past.
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