Japanese companies ease inflation expectations, pressure mounts on BOJ to ease

 Inflation expectations eased in Japan for the month of June, touting the measure of quantitative easing "ineffective". The weak inflation is likely to keep the Bank of Japan under pressure to administer a policy easing.

The inflation expectations, as per the Tankan sentiment survey, showed that consumer prices are expected to rise an average 0.7 percent a year from now, down 0.1 percentage point from three months ago and some way off the BoJ's 2 percent target, the tankan survey on price expectations showed on Monday.

The data on inflation expectations came after Friday's tankan sentiment survey showed business confidence was subdued in the second quarter, heightening pressure on the BOJ to roll out yet more stimuli to ease the pain from a strong yen.

Further, firms polled in the Tankan survey said they expect consumer prices to rise an annual 1.1 percent three years from now, unchanged from the projection in March. In five years' time, companies expect consumer prices to rise an annual 1.1 percent, lower than a 1.2 percent increase projected in the previous survey.

The central bank had rolled out a massive stimulus programme in February, under which it prints 80 trillion yen (USD780.9 billion) a year to buy government bonds, adding negative interest rates to its basket. As a result of the aggressive money printing, Japan's monetary base, or cash in circulation and deposits at financial institutions, rose to a record 404 trillion yen at the end of June, roughly 80 percent the size of its economy.

Meanwhile, core consumer price index, which excludes fresh food, fell 0.4 percent in May from a year earlier, marking the biggest drop since the BoJ deployed its huge asset-buying programme in 2013. The stiff challenge posed by the yen's rise on exports and weak inflation has heightened market expectations that the BOJ will expand monetary stimulus at its next rate review on July 28-29.