TOKYO—Officials and market participants agree that the Bank of Japan ought to do more to beat deflation, but they are divided over whether the central bank’s policy-setting board members have to do so this week.
Economic data offer plenty of reasons for easing at the central bank’s two-day meeting, which concludes Thursday. The economy is at risk of shrinking in the second quarter because of earthquakes that shook southern Japan recently. Inflation—including energy—is stuck near zero, while inflation expectations are by some measures the weakest in three years. Wage growth has slowed and the yen has strengthened.
All of that runs counter to Bank of Japan Gov. Haruhiko Kuroda’s three-year-old campaign to deliver 2% inflation and put Japan on a steady growth path. His latest gambit, a Jan. 29 decision to introduce negative interest rates on some commercial bank deposits at the central bank, hasn’t delivered results so far.
Officials recognize the challenge. At least five of the BOJ’s nine policy-setting board members think that at the coming meeting, the bank should push back its forecast date for achieving its 2% inflation target, according to people close to the bank. The current forecast calls for 2% to be reached between April 2017 and September 2017. The target date has already been pushed back three times in the past year.