The Bank of Japan (BoJ) pushed back its national inflation target for the fourth time in three years at its first meeting since a policy revamp in September, following a raft of disappointing economic data.
Following the two-day meeting, the Bank pushed back its forecast date for hitting 2% inflation to the fiscal year 2018/19, a year later than its previous target of fiscal 2017.
This marks the fourth time since the launch of quantitative and qualitative easing in April 2013 that the bank has been forced to delay the timeframe for reaching the target.
The BoJ, chaired by Haruhiko Kuroda (pictured), also announced its board had voted to continue to anchor 10-year government bond yields at 0%, renewing a controversial, new approach to easing it first announced in September.
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It also left its target for short-term interest rates on some commercial bank deposits in negative territory at -0.1%, despite widespread hopes in the country's banking sector of a return to positive territory.
The central bank's come in response to the release of poor economic data, with the government's headline inflation measure showing consumer prices have fallen in each month since March, while the BoJ's own inflation gauge rose just 0.2% in September, its slowest increase in three years.
The accompanying economic outlook released by the central bank also revealed that the median inflation forecast for the coming fiscal year, ending March 2018, had dropped from 1.7% to 1.5%, while the median forecast for fiscal year 2018 dropped from 1.9" to 1.7%.
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Marcel Thieliant, senior Japan economist at Capital Economics, said he expects further stimulus measures in coming months, noting that the front page of the bank's accompanying outlook report noted that risks to both economic activity and prices are skewed to the downside.
"Such a strong emphasis on downside risks is highly unusual, and suggests that the Bank retains an easing bias," he said.
"We expect underlying inflation to turn negative soon and we believe that policymakers will respond with a further cut in the policy rate, probably to -0.2% in January. However, we would not rule out a cut in December, shortly after the Fed is widely expected to hike interest rates."
Likewise, Michael Moen, investment manager at Aberdeen Asset Management, said the BoJ's moves suggest their level of concern is rising, due to the renewed focus on downside risk.
"The strength in the labour market and higher energy prices will buy the Bank some time, but inevitably falling inflation expectations and slowing underlying inflation will lead to further easing by mid 2017," he said.
