What will the Bank think of the consumption tax decision?

The Bank of Japan’s two-day Policy Boardmeeting, which concludes next Friday, will beovershadowed by the release of the Tankan surveyand the confirmation of the government’s decisionon the consumption tax, both due on Tuesday. Wedo not expect these announcements alone toprompt the central bank to loosen monetary policyfurther, especially if the government plans to offsetmost of the impact of the expected tax hike withadditional fiscal stimulus instead. That said, westill expect the Bank to extend its asset purchaseprogramme beyond the end of 2014, but thisdecision could wait until next year.