Monetary policy to remain loose for longer

While the economy should continue to grow at a robust pace, price pressures will strengthen only slowly. And with the sales tax hike scheduled for end-2019 clouding the outlook, the Bank of Japan is unlikely to tighten policy anytime soon. Growth has been strong lately. GDP has risen for four straight quarters and private consumption is finally recovering after a prolonged period of stagnation following 2014’s sales tax hike. Industrial production has almost surpassed the peak ahead of the tax hike. Firms’ forecasts point to a slump in March but output should still have risen at a solid pace in the first quarter, consistent with another healthy GDP print.