QQE continues to face strong headwinds

Three years after the launch of Quantitative and Qualitative Easing, the Bank of Japan’s efforts to stoke price pressures are failing. Business confidence has fallen to a three-year low while the appreciation of the yen has magnified the slump in import prices. What’s more, the ongoing spring wage negotiations will likely result in smaller base pay hikes than in 2015. Against this backdrop, we retain our forecast that the Bank of Japan will announce more monetary stimulus at its meeting later this month.