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ibusinesslines.com September 20, 2018


BOJ keeps lax monetary policy, forecasts steady growth

27 April 2017, 03:55 | Kelvin Horton

BOJ keeps lax monetary policy, forecasts steady growth

BOJ keeps lax monetary policy, forecasts steady growth

The Bank of Japan kept its stimulus policies unchanged while lowering its inflation forecast, underscoring that any exit from its unprecedented monetary easing remains far away.

"To be fair, the tax cuts were massive", said Vishnu Varathan, a senior economist at Mizuho Bank.

Analysts say the bank is trying to support Japan's economy by maintaining easing measures. "Global economic prospects have brightened but the BOJ would be cautious of giving out any signs it may withdraw its stimulus as doing so could trigger an unwelcome yen rise", said Mari Iwashita, chief market economist at SMBC Friend Securities.

The BOJ kept its policy unchanged, as expected, but Governor Haruhiko Kuroda conceded that public perceptions of future price rises remained subdued, suggesting the central bank will significantly lag its USA and European peers in exiting its massive stimulus programme.

Japan's economy grew by 1.2% on Y-o-Y basis, in the October to December quarter, as per the data revised in last month.

SLOW TO EXIT At Thursday's meeting, the BOJ is widely expected to leave unchanged its commitment to guide short-term interest rates at minus 0.1 percent and the 10-year government bond yield around zero percent through aggressive asset purchases.

"Japan's economy has been turning toward a moderate expansion", the BOJ said a quarterly review of its long-term economic and price projections, compared with the previous month's view that it was "improving moderately as a trend".


"We expect inflation to accelerate toward 2 percent but now, inflation is around zero percent", Kuroda told reporters after the policy meeting.

"Talking about a specific exit strategy now would cause undue confusion in markets", he said.

In its quarterly economic outlook report, the central bank upgraded Japan's GDP forecast for the 2017-18 fiscal year to 1.6%, from the 1.5% projected in January, signalling its confidence that a pick-up in overseas demand will help sustain an export-driven recovery.

The BOJ, which has an inflation target of 2%, cut its inflation projection for fiscal 2017 to 1.4% from 1.5%.

The pressure for change would however land on inflation expectations.

But core consumer prices for February rose just 0.2 percent from a year earlier, as weak private consumption has discouraged companies from raising prices. BOJ Gov. Haruhiko Kuroda said last week that the accommodative policy and asset purchases will continue for some time because inflation is "quite sluggish", underscoring how far the BOJ lags behind its counterparts in the USA and Europe.

Kuroda's comments come as the U.S. central bank raises interest rates while speculation swirls that the European Central Bank is considering backing off its own stimulus by turning off the taps on massive bond-buying or raising borrowing costs from historic lows.



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