The Bank of Japan kept monetary policy steady on Friday and upgraded its assessment of private consumption for the first time in six months, signaling its confidence in an export-driven economic recovery that is gaining momentum.
But Governor Haruhiko Kuroda reassured markets the BOJ will still lag well behind the Federal Reserve in dialing back its massive stimulus program, with inflation far from reaching his 2 percent target.
He also shrugged off the need to scrap the BOJ's pledge to increase its bond holdings at 80 trillion yen ($729 billion) per year, even though recent purchases have slowed significantly.
"There's some distance to achieving 2 percent inflation, so it's inappropriate to say now specifically how we will exit our ultra-loose monetary policy, and how that could affect the BOJ's financial health," Kuroda told a news conference.
"We will debate an exit strategy only after 2 percent inflation is achieved and price growth stays there stably."
As widely expected, the BOJ maintained its pledge to guide short-term interest rates at minus 0.1 percent and the 10-year government bond yield around zero under its yield curve control (YCC) program.
Relishing recent bright signs in the economy, the central bank upgraded its view on private consumption for the first time since December 2016 to say it has shown "increased resilience."
That was a more upbeat view than the previous meeting in April, when it said spending was resilient.
The BOJ revised up its assessment of global growth and reiterated its optimistic view that Japan's economy was heading for a moderate expansion.
"The BOJ has grown confident on the economy, although it is fully aware inflation remains low despite a tightening labor market," said Izuru Kato, chief economist at Totan Research.
"Unless inflation accelerates unexpectedly, the BOJ will likely stand pat on policy at least until next April when Kuroda serves out his current term."
Consumption has been a soft spot in Japan's otherwise strengthening economy, with its weakness blamed for keeping inflation subdued by discouraging companies from raising prices.
BOJ holds monetary policy steady but upgrades view on private consumption
June 16, 2017 by Leave a Comment