Tokyo: Bank of Japan (BoJ) refrained from adding to unprecedented monetary stimulus and raised its assessment of the economy, referring to a recovery for the first time since before a record 2011 earthquake.
Governor Haruhiko Kuroda’s board stuck with an April pledge to expand the monetary base by 60 to 70 trillion yen ($709 billion) per year, a statement released in Tokyo on Thursday showed. The decision was in line with the forecasts of all 20 economists surveyed by Bloomberg News. The economy is starting to recover moderately, the central bank said.
Economic gains increase the odds of Kuroda holding fire for the rest of this year, after a Bloomberg News survey this week showed analysts abandoning predictions for further easing in October. Prime Minister Shinzo Abe’s forecast victory in an upper-house election in 10 days may strengthen Abe’s hand for rolling out deregulation measures to sustain a recovery triggered by monetary and fiscal stimulus.
“BoJ’s confidence in the outlook for the economy and prices is deepening as a full recovery is in sight,” said Mari Iwashita, a bond strategist at SMBC Nikko Securities Inc.
The yen rose 1% to 98.69 per dollar as of 12.11pm in Tokyo.
The bank maintained its April forecast that prices, excluding the effect of a planned sales tax increase, will rise 1.9% in the year starting April 2015. It trimmed some other forecasts for inflation and economic growth. BoJ now sees inflation of 0.6% in the current fiscal year and 1.3% in the following 12 months.
The central bank is chasing a target of 2% inflation, focusing on a gauge that excludes fresh food.
“BoJ may adjust its policies as overseas conditions change,” deputy economy minister Yasutoshi Nishimura said in an interview in Hong Kong on Wednesday.
“The Bank of Japan has various options for its decisions as events unfold in the markets or overseas,’ Nishimura said. It will basically continue conducting its current policy, while being able to make various adjustments such as increasing the frequency of its bond purchases.
An Abe victory in the 21 July election would end a split parliament and help him push through a strategy to lower barriers to investment and hiring—the third of his three arrows after fiscal and monetary stimulus.
Reports since the last central bank meeting in June showed better-than-expected industrial production and retail sales, and large manufacturers turning optimistic for the first time in two years. BLOOMBERG