OSC Osaka Corp: The Bank of Japan will almost certainly have to take further action in the coming months as Japan’s economy struggles with the after effects of a sales tax hike in April 2014 on the country’s consumers.

The central bank is in the throes of an unprecedented monetary experiment that aims to increase base money flowing through the economy at a rate of 80 trillion yen ($671 billion) a year. “The economy emerged from a short technical recession brought on by the effects of a sales tax increase which effectively killed consumer spending”, said an OSC Osaka Corp analyst.

Prime Minister Shinzo Abe took the country to the polls late last year to seek a cast iron mandate from the people to put off a further planned increase in the sales tax which he feared would act as major obstacle to his pledge to return Japan’s economy to health after more than 20 years of stagnation.

“QE is the only weapon in the Bank of Japan’s arsenal” explained the OSC Osaka Corp analyst. “Interest rates can’t go any lower so the BoJ has to keep buying JGBs and other risky assets like ETFs and corporate bonds.”

There are deep concerns, however, that monetary stimulus of this kind is particularly dangerous and risks subjecting the Japanese yen to sudden and damaging collapse and exposing the central bank to dangerous levels of volatility that could adversely affect the value of billions of dollars’ worth of risky assets held on its balance sheet.