TOKYO: The Bank of Japan (BoJ) issued an upbeat assessment of Tokyo’s efforts to counter growth-sapping deflation on Thursday, as it left its vast monetary easing program unchanged.
In a widely expected move, the central bank said that its board voted unanimously to keep the current package of measures in place after a two-day policy meeting.
Investors are also keeping a close eye on the US Federal Reserve amid growing speculation that it would soon start tapering its huge stimulus program.
The BoJ, which unveiled its own gigantic bond-buying scheme in April, said that the outlook for the world’s third-biggest economy was looking brighter, while early signs of rising prices were good news for its efforts to hit a 2-percent inflation target in as many years.
Many analysts have heaped doubt on the BoJ”s ambitious timeline, given that Japan has been struggling with deflation for more than 15 years. The inflation target is a key part of an economy-boosting plan launched by Prime Minister Shinzo Abe, dubbed as “Abenomics.”
“Japan’s economy is starting to recover moderately,” the BoJ said on Thursday, pointing to better times ahead for key export markets.
“Overseas economies as a whole are gradually heading toward a pick-up, although a lackluster performance is partly seen . . . Inflation expectations appear to be rising as a whole,” it said.
The bank added that it would continue its easing plan “as long as necessary” to hit the price target and “make adjustments as appropriate.”
The statement also points to a rise in business and public investment, private consumption and industrial production, while exports were also improving.
On currency markets, the yen weakened after the BoJ announcement. Easing measures tend to weigh on the currency.
In Tokyo, the dollar fetched 96.76 yen from 96.39 yen in New York City Wednesday, while the euro also gained at 129.07 yen from 128.55 yen in US trading.
Japan has seen generally upbeat economic data in recent months, as a sharp decline in the yen since late last year gave a boost to the nation’s export sector.
The weaker currency helps make Japanese firms more competitive abroad, and inflates the value of repatriated foreign income. AFP
“Since the bank last met in early July Japanese economic data has been broadly positive, led by better than expected headline inflation data,” said Chris Tedder, research analyst at Forex.com in Sydney.
“The [BoJ] board may also want to wait for the release of preliminary second quarter gross domestic product data, which is due to be released on August 12, before becoming too bullish on Japan’s apparent economic recovery,” he added.
In June, Japanese consumer prices inched up 0.4 percent, although the rise was largely due to higher electricity prices rather than the sort of broad-based inflation that Tokyo wants.