BoJ to support economic sentiment through policy

One last additional economic stimulus package would not cost that much politically or financially. However, if the government neglects to go ahead with this, there is a big risk that Japan would ultimately fail to escape from deflation, just as has happened in the past.

Both the government and the BoJ need to realise that a similar mistake cannot occur again. Against this backdrop, it is necessary for the government and the BoJ to continue to support economic sentiment through policy until the real economy and inflation strengthen, suggests Societe Generale. 

It is likely that the government will try to declare a complete exit from deflation by the time the upper house election is held next summer. PM Abe's ruling coalition will likely target voters by pointing to the success of Abenomics. For this to materialise, the government is expected to reaccelerate its monetary and fiscal policies as soon as possible, added SocGen.