TOKYO: The Bank of Japan (BoJ) on Tuesday held off fresh monetary easing measures after weak growth data exacerbated fears about the economic impact of an April sales tax rise.
Wrapping up a two-day policy meeting, the BoJ said that it would keep its massive easing program in place, while tweaking a loan scheme to banks in a bid to stimulate lending to firms and consumers.
“Japan’s economy has continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed,” the BoJ said in a statement.
The sales tax hike—to 8 percent from 5 percent—is seen as crucial to bringing down Japan’s eye-watering national debt, but it has also raised fears that it will derail Tokyo’s bid to kickstart the world’s third-largest economy.
Analysts are widely predicting the BoJ will launch an expansion of its asset-buying plan, launched last April, later this year to counter any slowdown. All eyes are now on a press briefing from BoJ Governor Haruhiko Kuroda later in the day to see if the bank chief will hint at future policy moves.
On Monday, fresh data showed that while Japan’s economy expanded by 1.6 percent over last year, it slowed to 0.3 percent in the October to December quarter, presenting a major challenge for Prime Minister Shinzo Abe and his bid to stoke growth after almost two decades of deflation.
“It was no surprise that the Bank of Japan did not change course at today’s meeting, but we still think that more easing will eventually be required,” London-based Capital Economics said.
In forex markets, the dollar bounced back with the greenback buying 102.34 yen, from below the 102-yen level before the BoJ announcement.