October 13, 2016 / 5:32 AM / a year ago

Japan households' inflation expectations sag to four-year low: BOJ

Shoppers browse vegetables at a supermarket in Chiba, east of Tokyo February 26, 2014. REUTERS/Yuya Shino

TOKYO (Reuters) - Japanese households’ inflation expectations weakened for the fifth straight quarter to a nearly four-year low in July-September, a central bank survey showed, a sign its heavy money printing is failing to boost stagnant economic growth.

The ratio of households which expect prices to rise a year from now stood at 65.1 percent in September, down from 72.4 percent in June, to hit its lowest since December 2012, the BOJ’s survey on people’s livelihood showed on Thursday.

The ratio peaked five months after the BOJ adopted its massive asset-buying program in April 2013, suggesting that BOJ Governor Haruhiko Kuroda’s radical monetary experiment had only a temporary effect in heightening inflation expectations.

“Despite the BOJ’s aggressive easing, inflation expectations are weakening. Instead of raising prices, many companies are beginning to cut prices because of consumption is weak,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“The BOJ will probably cut its inflation forecasts again at the next rate review.”

The central bank last month switched its policy target to interest rates from the pace of money printing, after years of massive asset purchases failed to jolt the economy out of decades-long stagnation and accelerate inflation to its 2 percent target.

The BOJ is likely to slightly cut next fiscal year’s inflation forecast in a quarterly review, sources familiar with its thinking say, but the central bank isn’t expected to ease in the near term after having just revamped its policy framework.

The survey also showed 80.1 percent of the total number of households surveyed expect inflation to pick up five years from now, down from 83.6 percent in June.

As for underlying price moves, 64.5 percent said they believe prices rose from a year ago, down from 73.1 percent in June and the lowest level since June 2013, the survey showed.

A separate index measuring households’ confidence about the economy stood at minus 23.1 in September, improving from minus 27.3 in June, the survey showed.

The index subtracts the ratio of households which feel economic conditions have worsened from those which believe they have improved. A negative reading means more households feel economic conditions have deteriorated.

Reporting by Leika Kihara; Editing by Clarence Fernandez & Shri Navaratnam

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