BoJ leaves monetary policy unchanged as forecast

The Bank of Japan (BoJ) refrained from expanding monetary stimulus as Governor Haruhiko Kuroda bets the world's third-biggest economy will emerge from a recent soft patch and inflation will pick up. The central bank will keep increasing the monetary base at an annual pace of 80 trillion yen ($640 billion), as expected by economists.

BoJ officials are assessing the strength of a rebound from what Goldman Sachs Group Inc. and JPMorgan Chase & Co. estimate to be the first contraction since the economy took a dive last year after a salestax hike. While Kuroda sees last quarter's weakness as temporary, high inventories and a slowdown in China are risks to achieving his 2 percent inflation target.

"Unless inflation gains a bit more momentum, it'll get harder for the BoJ to reach its goal within its timeframe," said Maiko Noguchi, an economist at Daiwa Securities Group Inc. and a former official at the central bank.

Daiwa Institute of Research estimates the economy shrank as much as an annu- alized 3.3 percent in the three months through June, ending two quarters of expansion. Kuroda said that he didn't think "at all" that weakness last quarter will continue, and reiterated his view that inflation will reach 2 percent around the six months through September 2016.

The central bank has been highlighting indicators showing inflation pressures building. One gauge that strips out fresh food as well as energy costs that have steamrolled its main measure to near 0 percent showed inflation picking up to 0.7 percent in May.