Kuroda speaks during a news conference at the central bank’s headquarters in Tokyo. The Bank of Japan yesterday kept monetary policy steady and offered a slightly more upbeat view on overseas growth.
Reuters/Tokyo
The Bank of Japan kept monetary policy steady yesterday and offered a slightly more upbeat view on overseas growth, signalling confidence the economy is on course to meet its inflation target next year without additional stimulus.
Governor Haruhiko Kuroda said Japan’s economy was showing signs of having weathered a sales tax hike in April that had been watched by economists as a risk to the recovery.
“The economy is moving roughly within our expectations. Household spending remains solid as a trend,” Kuroda told reporters, noting there were also signs of clear improvement in job conditions and incomes.
“We expect a gentle recovery to continue,” he added.
The BoJ has become increasingly convinced the world’s third-largest economy will continue its modest recovery, with companies ramping up capital spending and consumer confidence holding up despite the pain from a recent sales tax hike.
Sluggish exports remain a soft spot for the economy, however, although BoJ officials see overseas headwinds receding as China’s exports rebound and as the US economy recovers from a severe winter.
“Overseas economies, mainly advanced economies, are recovering, although lacklustre performances are seen in some areas,” the central bank said in a statement issued before Kuroda began speaking to reporters.
That was a slightly brighter view than last month, when it said global growth was “starting to recover” albeit with lacklustre performances in some areas.
As widely expected, the BoJ maintained its monetary policy framework, under which it has pledged to increase base money by ¥60tn-¥70tn ($588bn-$686bn) per year via aggressive asset purchases.
The central bank also left unchanged its assessment that Japan’s economy continues to recover moderately as a trend, while exports have been “more or less flat.” The ECB last week became the first major central bank to impose negative interest rates, or charge financial institutions for parking funds at the central bank, a move markets see as partly aimed at keeping euro gains in check.
Some in the BoJ, who have been surprised by the unusually blunt language ECB officials have been using to rein in euro rises, were relieved to see that the ECB’s policy action did not lead to a sharp yen rebound against the euro.
Both the ECB and the BoJ argue that their monetary policies do not directly aim at influencing currencies. But they do prefer their currencies to weaken because that will push up prices and give their exports a competitive advantage overseas.
Japan logged its fastest growth in two years in the first quarter thanks to surprisingly strong capital spending, in a fresh sign that the economy is in better shape to weather the hit from the sales tax hike in April. Kuroda’s optimism has led market players to scale back bets of further monetary easing this year, though many economists remain sceptical that prices will continue to pick up.