BoJ leaves mon­e­tary pol­icy un­changed as forecast

The Pak Banker - - FRONT PAGE -

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.

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