Bank of Japan maintains expansionist policy despite soft GDP data
Central bank remains confident economy can weather the pain from a sales tax increase
The Bank of Japan maintained its expansionary monetary policy and reiterated its upbeat view on the economy, unfazed by recent signs of slower growth and suggesting that any additional stimulus will be some time away.
The widely expected decision triggered a brief rebound in the yen as some investors unwound positions after betting that Monday's soft GDP data might prompt the central bank to act.
Markets are on the lookout for clues from governor Haruhiko Kuroda at his post-meeting news conference on whether signs of weakening personal consumption will make the bank ease policy further.
As widely expected, the bank maintained its pledge of increasing base money, its key monetary policy gauge, at an annual pace of 60 trillion yen (HK$4.57 trillion) to 70 trillion yen.
The BOJ already expects the economy to contract … after the sales tax hike
The central bank stuck to its assessment that Japan is recovering moderately, a sign it remains confident the world's third-largest economy can weather the pain from a sales tax increase in April.
"The Bank of Japan already expects the economy to contract immediately after the sales tax hike, so this cannot be the basis for additional easing," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management.
The central bank also extended special loan facilities, cobbled together between 2010 and 2012 as a way to drive funds through the banking sector to borrowers, by one year beyond their current expiry date in March.
It will double the size of funds available to financial institutions through the various loan facilities in the hope they would boost lending instead of sitting on the pile of cash.
Monday's weaker-than-expected fourth-quarter GDP has dashed hopes that a rush in household spending before the April tax rise would cushion the pain from sluggish export growth.
While the Bank of Japan is in no mood to act immediately, market pressure for more stimulus may rise in coming months if there is more evidence that personal consumption is losing momentum, some analysts say.
Markets are focused on whether Kuroda will stick to his view, offered last month, that no further easing was needed now with prices rising steadily and overseas economies recovering.
