Bank of Japan keeps policy steady, but more easing still expected at end of month

The Bank of Japan held off on expanding stimulus on Wednesday, even as slumping exports and falling oil prices threaten its rosy projection that the economy is on track to hit the bank’s ambitious 2 per cent inflation target next year.

But lingering fears of recession mean economists still expect the central bank to ease policy at a more crucial meeting on October 30, when it is expected to cut its long-term economic and price forecasts.

Bank of Japan governor Haruhiko Kuroda remained bullish that the bank’s massive money-printing will eventually lift the world’s third-biggest economy decisively out of nearly two decades of deflation, but some economists were unconvinced.

“The trend of consumer rises is rising steadily,” he told a news conference after the Bank of Japan maintained its pledge to increase base money at an annual pace of 80 trillion yen (HK$5.17 trillion) through aggressive purchases of assets such as government bonds. “There is absolutely no change to our stance that we will steadily implement quantitative and qualitative easing to achieve the 2 per cent inflation target at the earliest possible time.”

Bank of Japan omission raises doubts over radical stimulus

Kuroda said he expected to hit the inflation target around the six months from next April but that could depend on oil prices, which have slumped sharply since the middle of last year.

The Bank of Japan maintained its optimistic view that while exports and output have been hurt by slowing emerging market growth, Japan’s economy continues to recover moderately.