Bank of Japan won’t rush to tighten policy

With the economy seemingly running hot and underlying inflation still accelerating, the case for tighter monetary policy looks increasingly compelling. However, we still expect the Bank of Japan to keep policy loose. For one thing, real household incomes are still falling rapidly so above-trend growth won’t be sustained. What's more, there are now clear signs that plunging import costs are feeding through to lower goods inflation, casting doubt over the sustainability of above-target inflation.