Bank of Japan most upbeat on economy in nine years

TOKYO: The Bank of Japan (BoJ) kept monetary policy unchanged yesterday and offered its most optimistic assessment of the economy in nine years, signalling its confidence that a pick-up in overseas demand will help sustain an export-driven recovery.

But the central bank slightly cut its inflation forecast for this fiscal year in a quarterly review of its projections, suggesting that it will maintain its massive monetary stimulus for the time being to achieve its ambitious 2% target.

Later, BoJ governor Haruhiko Kuroda warned it is “likely” that an inflation target already running four years late would be delayed once again.

He told reporters that policymakers would not slow down their monetary easing programme until their 2% goal had been achieved.

In a widely expected move, the BoJ maintained its short-term interest rate target at minus 0.1% and a pledge to guide 10-year government bond yields around 0%.

“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.”

It was the first time since March 2008 the BoJ used the word “expansion” in describing the state of the economy, signalling its conviction that the recovery was gaining momentum and that it sees no need for additional stimulus.

The BoJ raised its economic growth forecast for the current fiscal year to 1.6% from 1.5% earlier. – Reuters, AFP