Bank of Ja­pan hold­ing fire on stim­u­lus as econ­omy picks up

The China Post - - WORLD BUSINESS -

The Bank of Ja­pan (BOJ) held fire on more stim­u­lus Fri­day as it pointed to a pick-up in the econ­omy, de­spite flat-lin­ing in­fla­tion that has de­fied a two-year-old mon­e­tary eas­ing pro­gram.

In a widely ex­pected de­ci­sion, the cen­tral bank said it would stand pat on a record 80 tril­lion yen (US$650 bil­lion) an­nual as­set­buy­ing scheme that is aimed at jack­ing up prices and kick­start­ing growth.

The bank also said it would move to im­prove its com­mu­ni­ca­tion by is­su­ing more fre­quent and de­tailed re­ports on its out­look for the econ­omy and prices, while cut­ting the num­ber of pol­icy meet­ings to eight from the cur­rent 14 a year.

Traders are now wait­ing for a reg­u­lar news brief­ing from BOJ chief Haruhiko Kuroda, whose com­ments last week about the weak­ness of the yen sparked a short-lived surge in the cur­rency. He later back­tracked on com­ments.

While the yen’s sharp de­cline has been good news for Ja­panese ex­porters, it has pushed up the cost of im­ports and eroded con­sumers’ pur­chas­ing power.

In Fri­day forex trad­ing, the dol­lar bought 122.99 yen, lit­tle changed from be­fore Fri­day’s state­ment and slightly stronger than 122.93 yen in New York.

“Ja­pan’s econ­omy has con­tin­ued to re­cover mod­er­ately,” the BOJ said Fri­day fol­low­ing its two­day meet­ing.

Pol­i­cy­mak­ers pointed to an im­prove­ment in ex­ports, fac­tory out­put and cap­i­tal spend­ing, as Tokyo pushes com­pa­nies to hike wages in a bid to stim­u­late con­sumer spend­ing, af­ter a sales tax rise last year pushed Ja­pan into a brief re­ces­sion.

“Against the back­ground of steady im­prove­ment in the em­ploy­ment and in­come sit­u­a­tion, pri­vate con­sump­tion has been re-

those silient and hous­ing in­vest­ment has started to pick up,” the bank said.

Econ­o­mists ex­pect a fur­ther loos­en­ing of mon­e­tary pol­icy, likely later this year, to bring Ja­pan closer to its 2-per­cent in­fla­tion tar­get, which is a corner­stone of Prime Min­is­ter Shinzo Abe’s drive to con­quer years of de­fla­tion.

The coun­try’s near-zero in­fla­tion rate is far be­low the BOJ’s tar­get.

Ear­lier this week, Ja­pan re­ported a sharp drop in its May trade deficit, but still-lack­lus­ter ship­ments over­seas failed to off­set a fall in energy im­ports.

In the first quar­ter of 2015, Ja­pan’s econ­omy grew 1.0 per­cent, or 3.9 per­cent on an an­nu­al­ized ba­sis.

But there was still con­cern about the health of the econ­omy, par­tic­u­larly that weak de­mand over­seas could drag on fac­tory out­put as man­u­fac­tur­ers try to cut an in­ven­tory build-up that boosted growth in the first three months of the year.

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