Two months after the country's consumption tax rate was raised for the first time in 17 years on
The yen's depreciation on the back of the
But economic data for April, released late last month by the
Kuroda has expressed hope that a possible wage increase would cushion the adverse impact of the tax change, but the average monthly income of salaried households plummeted 7.1 percent from a year earlier in real terms in April, the
"Wages are unlikely to grow at a pace that can prop up consumer spending following the tax hike," said
"If income growth is tepid, retail sales will become sluggish and corporate profits will decrease, which could prompt companies to cut wages for their workers," he said, adding, "Under this circumstance, it is inevitable for the economy to languish."
Inflationary pressures, meanwhile, are expected to persist regardless of the economic situation, given that the yen has shown little sign of strengthening.
In addition to the BOJ's drastic credit easing, the U.S. Federal Reserve's tapering of its massive monetary stimulus and Japanese life insurers' boosting purchases of foreign bonds to seek higher returns will help push down the yen, dealers say.
"As the interest rate gap between
In fiscal 2013 through
With the yen falling, the country's core consumer price index surged 3.2 percent in April from a year earlier, the fastest pace since
As the BOJ estimates the impact of the tax hike will account for 1.7 percentage points of the overall inflation for April, the CPI increase, excluding the effects of the tax rise, will be 1.5 points, higher than market expectations.
"Although many Japanese people still believe that the weaker yen will shore up exports and support the economy, it may no longer benefit the nation's economy," Ishikawa said.
Masashi Shimominami, credit strategist at
"Bad inflation is one of the major downside risks to the Japanese economy," Shimominami said.
Even within the BOJ, some policymakers have started to argue the central bank must avoid any misunderstanding in financial markets over its 2 percent inflation goal, underscoring the bank is not pursuing higher prices without economic improvement.
"What the price stability target aims to achieve is not a situation in which only prices will rise,"
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